Business Environment Report: Analysis of Business Environment Factors

This report delves into the intricacies of the business environment, providing a comprehensive overview of various organization types, including public, private, and voluntary sectors, along with their legal structures. The report analyzes the size and scope of different organizations, using British Airways, McLaren Automotive, and Oxfam as case studies. It explores the interrelationship of organizational functions and their links to the organizational structure. Furthermore, the report conducts a PESTLE analysis of British Airways and examines internal and external factors, identifying strengths and weaknesses. The report concludes by explaining how these strengths and weaknesses interrelate with external macro factors, providing a holistic understanding of the business environment and its impact on organizational success. The report covers topics like sole proprietorship, partnership firms, limited companies and voluntary organisations.

BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P 1 Types and forms of business organization in a business environment............................1
P2 The size and scope of a range of different types of organisations....................................4
P 3 Explain the functions for the organization that are interrelated and the link to the structure
of the organization..................................................................................................................7
TASK 2............................................................................................................................................9
P 4 PESTLE analysis of British Airways (M3)......................................................................9
P 5 Conduct internal and external analysis of specific organisations in order to identify
strengths and weaknesses (M4)............................................................................................11
P 6 Explain how strengths and weaknesses interrelate with external macro factors...........13
CONCLUSION..............................................................................................................................13
Books and journals...............................................................................................................14

INTRODUCTION
Business environment is considered as the situation in which the business grows or
sustains (Pulver, 2012). Circumstances surrounding the business are knows as the factors of the
business environment. Business environment include the several internal and external factors,
which are determinants of the business growth. These factors may sometimes also influence each
other and they work together and affect the business. This report will focus on British Airways,
McLaren Automotive and Oxfam to contemplate the factors of business environment. It will
cover the types of business; factors of each type with the influence of these factors the current
scenario.
TASK 1
P 1 Types and forms of business organization in a business environment
There are generally two kinds of businesses:
 Profitable organization : These kinds of business have their sole purpose as to earn
profits. They focus on generating revenue in order to maximize their profits. These
businesses are more focused on the growth in terms of revenue generated. Earnings of the
business are distributed among the owners of the business (Klapper, 2011). Nonprofit organization: This kind of organization's main goal is to serve the society. Any
revenue earned by the organization is not distributed among the core operators instead,
the money is put into the mission and activities that will be performed for welfare of the
people.
Organization types :
The organization can be classified into 3 parts. i.e. private, public and voluntary
organization.
 Private sector organization: These are privately owned institutions, which are established
with the sole purpose of earning profits. These do not adhere any government
interventions until there is an open case against the company or the institution is facing a
scrutiny charge or tax invasion charges. The owners of the business manage this kind of
organization. McLaren automotive focus on maximization of profit with superior
customer satisfaction.
 Public sector organization: The company which is owned and controlled by the
government fall under the category of public sector organization (Ebert, 2014.). British
1

Airways’ main purpose is to satisfy customers and the employees by giving necessary
support and facilities. At same time company, main aim is to earn good amount of profits.
It are intervened by the government and the objectives of the company mostly line with
that of government. To get financial support the company can approach government
whenever require or they can also borrow money from the public by varied sources. Voluntary organization: This kind of organization is established in order to serve the
society. Oxfam focus on improving the current condition of the society. It does not
concentrate on maximization of revenue to earn more profits, the profits earned are also
recycled to finance the objectives of the organization.
Legal structure of private sector organization:
 Sole proprietorship: A business operated and functioned by a single owner is known as
sole proprietorship. This kind of business needs the least capital and is easy to start as
compared any other form. The purpose of the business is to earn profits. Profit earned
and the loss incurred in business is faced by the only person running the business. The
business earns profit with the sale of dealing products.
◦ The proprietor of the business has unlimited liability towards the business, i.e. the
debts of the business can be compensated by personal property of the proprietor.
◦ The owner is the only decision-making authority and his decision is final. The
decision making quick as only one person takes all the decisions.
◦ The owner is the only financing party of the businesses.
◦ At the death or retirement of the proprietor, the business may end.
◦ No separate legal entity, the sole proprietor and the proprietorship are considered as
the same person.
 Partnership firm : When 2 or more individuals agree to commence business together
under the binding of a partnership agreement, then it is called partnership business (Sena
Ferreira, Et Al. 2012).
◦ All the partners have unlimited liability towards the debts of the business, i.e. the
creditor may claim on the personal property of the partners to recover his debt. With
an exception of limited partnership, where claims can not be made on the personal
property of the partners. The purpose of the business is to generate maximum revenue
so as, to earn profits.
2

◦ Separate legal entity, the partnership is a apart individual and is separate from the
partners.
◦ The profits and losses are distributed among the partners in their profit sharing ratio,
which is mentioned in the partnership agreement. However, the losses in the limited
partnership are shares up to the liability of the partners.
◦ The decision making process is complex as partners take the decisions together.
◦ The partnership deed do not end on the choice of minority or majority of partners, it
can be dissolved on the agreement of all the partners. The partnership may also
dissolve in case of bankruptcy. If any of the partner dies, retires the partnership
dissolves.
◦ The source of finance are the partners of the firm.
 Limited company : The private company are the organization which are managed by the
board of directors of the company (Arrow, 2013.). There company are of two types
limited company and limited liability company. The general difference between the two
types of companies is the limited company is owned by the public at whole and the
limited liability company owned by a group of individuals.
◦ Finance for the limited company can be obtained by issuing shares to the public. The
members of the company provide finance for the limited liability company.
◦ Board of members of the company does management of the limited company
whereas designated members of the company do management in the limited liability
company.
◦ The company is a separate legal entity. It is separate from its members and has its
own identity.
◦ The liability in both the kind of companies is limited to the holding of shareholders.
In Limited Liability Company, members are the shareholders (Carroll, 2014).
◦ The shares of the limited company is transferable to any person who is willing to buy
them. Whereas the shares of the other kind of company are nontransferable to anyone,
although they can be transferred in case of death of a member to any person whose
name is mentioned in will of diseased person.
3

◦ The profits in the limited company are distributed in form of dividend to the
shareholders whereas the profits of the limited liability company are shared by within
the shareholders
◦ In case shareholder dies, limited company is not effected by that. If a member of
limited liability dies then his shares are transferred to his inheritor.
Legal structure of public company :
 The public company is owned and governed by the government.
 The government from its budget funds finances the company (Galbraith, 2011).
 It is separate is legal entity.
 The directors of the company do the management of the company. The directors can be
appointed or lay off by the government.
 The company keeps on running, the change of government does not effect its existence.
Legal structure of voluntary sector organization :
 Separate legal entity. This kind of organization has a separate identity from its owners.
 The financing is obtained by organizing charity programmer donation and sometimes
government also finances such organizations.
 The liability of the members is limited to their holding in the institution.
 The members of the organization do management. They set the missions and goals for the
organization.
P2 The size and scope of a range of different types of organisations
The companies of different types have their own goals and objectives to achieve. There
scope differ according to their type and size (Ashkenas, 2015).
Public organization : Public organization chosen for the purpose of the study is British Airways.
It is a public airline company which was formed in 1974. It has its headquarter in at the London
Heathrow Airport. It has largest fleet in the UK and has the second largest customer base in the
mentioned nation, first place is occupied by Easy Jet. British Airways provides its customers
with a better travelling experience with its airline services in many parts of the world. The
company has its operations in around 183 destinations around the world with the fleet size of 272
aircraft. British Airways is one of the largest airline company in the world.
4

Company is working in a tough and competitive environment. Mentioned firm earned a
revenue of £11,443 in the year 2016 and have grown since the last year. It has a large customer
base and the operates in 183 destinations.
The company is looking to grow itself in London and become the leading airline
company. British Airways can widen its network in the different parts of the world. This will
help the company expand grow on the global level. They must look to launch new routes and
purchase new aircraft to lay a better network. The company is highly influential in the coming
time.
M 1
The company aims on achieving statical objectives in the coming period. Firm wants to do
expansion of its network with its new routes in the emerging global cities. To attain maximum
customer satisfaction and maximize its profits. Second objective is to attain the leading position
in London by influencing the government policies decisions and also empowering the airport
owners to build more infrastructure to support its development.
Stakeholders :
 Supplier : The suppliers are the company's are the vendors who supply the company with
goods and services (Edward Freeman, 2010). The suppliers of British airways are the
aircraft manufacturers such as Boeing and Airbus. They are highly influenced by the
company's decisions as the company has to pay the debts to them.
 Customers : The customers are the individuals who purchases the products and services
of the company. The customers of the British Airways are the population of people who
travel by the air transport. The company targets the middle and high class individuals of
the society. Government : The government of the UK is highly influenced by the objectives and
actions of British Airways as the company is a source of vast Tax for the government.
Also, it employees around 40000 people around the world.
Private organization : The private company is a privately owned organisation whose primary
purpose is to earn profit from the sale of products (Časas, 2011). The company chosen of the
purpose is McLaren Automotive. The company was founded in 1985. McLaren automotive is the
part of the McLaren group. The company deals in the production and sales of the motor cars
across globe. The company focuses on the manufacturing of sports and luxury cars. These cars
5

include a number of sports cars which are expensive and can be bought by a minimal group of
the population.
McLaren automotive is one of the biggest sports cars manufacturers in the world have a total
revenue of £450.6 million in the year 2016. The company operates in number of different
countries and expected to grow rapidly in coming years.
The company has a strategic plan for its future with a number of cars coming in the next
coming years. It will also introduce a new naming strategy into its new series of cars that
includes range names (super ultimate and sports) derivatives as (LT, S, C). McLaren automotive
is looking to sell the new models of its cars which it will introduce in the next event. The
company is looking forward to boost its sales in the next year. The pre owned sales, which has
been double from the last year has allowed the company to ensure its boosting sales revenue in
the coming year. The new model which is expected to be extremely popular with the news of its
excitement within the McLaren fans from the very time of its prototype was introduced. The
company.
Stake holders :
 Customers : A company must understand the needs and wants of the customers
(Routledge, 2014). The customers of McLaren are a narrow group of people who can
afford expensive and luxurious cars. The company targets customers who fall in a very
high income range and are willing to buy extreme motor cars.
 Employees : The employees of a company are the work force which manufactures,
distributes and sells the motor cars for the company. They are extremely affected by the
actions of the company as they are employed by the company.+
 Government : The government is affected by the actions of McLaren automotive as the
company pays a large amount of taxes which sums up the budget of the government and
it also employs a large amount of work force.
Voluntary organization : The voluntary organizations are uniquely motivated to work for the
society (Razmerita, 2013). Oxfam was founded in 1942 to relive the starving citizens of the
occupied Greece by influencing the British government. The organization rose from there to
become a global foundation for relief activities. Its priority agenda is reduction in the global
poverty.
6

Oxfam is a global level organization based in Oxford UK. It is currently working to eradicate
poverty at the global level. The organization is works in certain values and believes in right to
identity, right to the right to a sustainable livelihood the right to basic social services the right to
life and security and to be heard.
Oxfam has broad scope in the providing services to the people of the world. The
organization offers a wide range of services and help to the vulnerable population, who are less
cared or not cared for. Oxfam finds its finance from the charity and government sources.
Stakeholders of Oxfam :
 Customers : The customers or clients of Oxfam are the people who are suffering from
major issues and need their help. The decision made by the organization depend their
survival.
 Government : The government of the countries where the company operates support or
do not support the operations of the organization (Low, 2011.). The mission of the
organization can not complete without the support of the governments.
D 1
The structure of business organization propose several complexities in different
organization. In case of sole proprietorship the complexity level is quite high as there is just one
person authority over many employees which creates difficulty. In the partnership structure there
are more than one people with authority which makes its easier to control the staff and it
provides moderate complexity. Company faces the least complexity in case of control as every
person in the company is responsible to his work and is controlled by superior authority.
The functions performed by departments of McLaren are interrelated with each other.
The function of finance department is to organize money for the operations of marketing,
production and HR department of the company. The finance is arranged to pay the staff working
in the production, marketing and finance department, which is payed by the HR department. The
working of one department affects the working of another one, as if the HR department laps in
allocation of salary the staff will be dissatisfied and production will degrade
7

P 3 Explain the functions for the organization that are interrelated and the link to the structure of
the organization
British airways main objective is to give its customers supreme quality services and
become the leading airline company in London. The company follows a traditional structure of
organization. The company is divided into different departments and each department has its
separate functions.
 Human resource department : The human resource department is concerned with the
employees of the company (Nelson Education. et.al. 2017). It focuses completely on the
working of the British airways with respect to the work force.
◦ Human resource management is responsible of hire and lay off of the employees.
◦ This department also looks after the training of the staff of the company to make them
work even better.
◦ The human resource department also fulfils the duty of keeping the environment of
the British Airways healthy for the workers.
 Finance department : Finance department is the branch of the company which is
concerned with all the financial activities of organisation (Zheng,2010). The finance
department of British Airways focuses on all the finance related acts of the company.
◦ The basic function of the finance department is to availability of finance for the
company when it is most needed by the company.
◦ It is also dutiful to maintain the accounting records of the British Airways and keep
the management updated about the expenditure and income.
◦ The finance department also looks for the sources of finance for the company.
◦ The budget report is also made by the finance department and make plans for the
future activities of the company in compliance with the budget introduced.
◦ Internal auditing is also the responsibility of the finance department. They are liable
to check the books of the company to conclude tax payment and find out errors.
8

 Marketing department : This department is concerned with the maximization of the sale
of products and services offered by the company (Rus, 2010). The marketing department
of British airways focuses on increasing the revenue of the company.
◦ The marketing department's focus is to enhance the ticket sales and increase the
number of passengers of the British Airways.
◦ Another function of the department is to make plans for the promotion of the services
offered by the British Airways.
◦ The marketing department also makes the pricing strategy for British Airways to
enhance its customer base.
◦ This department is also concerned with improving the services of the company to
provide the consumers with satisfactory services and gain customer loyalty.
 Operations department : This department takes care of the functions of the company and
its day to day operations. The operations' department of British Airways performs certain
functions.
◦ The operations' department first function is to locate the task which are to be
performed by in the company.
◦ This department also allocates the tasks to different workers of the British airways.
The pilots and the crew members are assigned tasks by the operation department.
All the departments depend on each other for the smooth working of the organization. The
human resource department supplies with the manpower to work in all the departments. The
finance department provides the money to all the departments for the functioning of each
department (Czinkota, 2011). The day to day activities are taken care by the operations'
department which make the customers satisfied and swift running of the company is ensured.
The marketing department makes plan to promote the services of the company which enhances
sales and creates revenue to support all the departments.
M 2
The functions performed all the departments are interlined with each other. The functions
performed by one department form base for the operations of other departments, for instance the
9

finance department arranges finance for the operations of organization which support the
working of all the departments. This provides flow to the entity and all the departments function
successfully together. On the contrary, this may also have adverse effects as ill functioning of
one department will degrade the performance of other departments also as they are
interdependent on each other. This will create chaos in the structure.
TASK 2
P 4 PESTLE analysis of British Airways (M3)
The PESTLE analysis of British Airways and its positive and negative impacts are described
below:
Political Analysis: British airways is one of major airline that flies for over 400 destinations all
around world. Stability in political environment and the vision of safety by the natives is a vital
political factor that impact on airline (Jurevicius, 2013).
 Positive Impacts: Political stability enables airlines to develop and grow more runways
and improve its infrastructure which assist in increase in business activities. Negative Impacts: Change in taxation policies and development of certain rules and
regulations regarding working structure of airways implies negative impacts on business.
Economic Analysis: Performance of British Airways is influenced by certain economic factors
such as currency exchange rates, inflation rates and overall economic environment in UK which
lays direct and indirect implications on organisation.
 Positive Impacts: Efficient increase in economic climate and low inflation rate provide
positive advantages to airlines in generation of revenues and profits. Negative Impacts: Frequently changing the economic environment in European countries
leads in creating recessional crises which impacts on British Airways in negative effects.
Social Analysis: Consumers and travels prefer airlines which have smooth functioning, errorless
service and effective working. British airways are considered as trusted airlines by population of
UK.
 Positive Impacts: Increase in consumers and travellers (Yüksel, 2012).
10