Business Environment Analysis: Types, Functions, and Impact Report

This report provides a comprehensive analysis of the business environment, encompassing both internal and external factors. It begins with an introduction to the business environment and its significance, followed by an examination of different types of organizations, including public, private, and voluntary organizations, along with their purposes and legal structures. The report then explores the size and scope of various organizations, categorizing them as micro, small, medium, and large, while highlighting key stakeholders and growth opportunities. A significant portion of the report focuses on the relationship between different organizational functions, such as marketing, finance, HR, and operations, and how they interrelate to achieve business objectives. Furthermore, the report delves into the positive and negative impacts of the macro environment on businesses. The report also includes an internal analysis, considering the interrelation of external and internal factors, utilizing tools like SWOT and PESTLE to assess the competitive landscape and provide strategic insights.

UNIT 1 - BUSINESS AND
THE BUSINESS
ENVIRONMENT

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
Types and Purpose of Organisation.............................................................................................1
Size and Scope of Different Types of Organizations..................................................................3
LO 2.................................................................................................................................................6
Relationship Between Different Organisational Functions........................................................6
LO 3.................................................................................................................................................8
Positive and negative impact of macro environment...................................................................8
LO 4...............................................................................................................................................10
Internal Analysis........................................................................................................................10
Interrelation of external factors and internal factors..................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Business environment is the entire study of the internal and external factors of the
organization which are technological, needs, customers, employees, suppliers, owners,
expectations, clients, innovations, etc. These environments directly and indirectly on the
organization which needs to be control or managed by the organization effectively so that
they can have a better functioning for themselves. The decisions which are being made
for the future by the organization have to be thought through so that the company can
have better functioning for themselves.
The report is going to consist of internal and external environment of
organizations so that there are effective and better decisions for the organization which
can be taken. SWOT and PESTLE is going to be analyzed in this report to understand the
internal and external environment. Types and purpose of organization in the market is
also going to be discussed. There are a lot of changes which are taking place in the
market therefore understanding them is important only then the company should plan for
the future.
LO 1
Types and Purpose of Organisation
Public Organisation
Public organisations are those which are owned by government with main
objective of social welfare (Kot, 2018). The main focus of the public company is to
support citizens of country and increase their standards of living h providing products and
services. NHS is health care organisation of UK which provides its health care services to
its citizens effectively.
Purpose
 NHS provides services to public at lower cost to ensure the health safety of people
in the country and treat every citizen equally irrespective of charges.
 Public organisation also provides better innovative services to its citizens and
increases their satisfaction effectively.
1

 There are many agencies which government provide to public to ensure their well
being which includes, police, education system, healthcare system, transportation.
This also helps to increase the quality of living of public in the country effectively.
Legal Structure
 Public organisation is able to trade their shares in public to increase their capital
and improve the size of the company effectively.
 Liabilities of the public organisation are unlimited as they have to provide all the
information to the government before making any decision.
Private Organisation
Private organisation are those which contributes in the national economy to
increase the productivity of the nation (Okeyo, Gathungu and Peter, 2016). Organisation
which are operated by individual or group of individual in order to earn more profits. For
example, Tesco is private organisation which helps to provide grocery products to
customers and earn profits and also compete in the market effectively.
Purpose
 The main purpose of private organisation is to increase profit maximisation and
improve the quality of products and services to develop higher market share and
compete in the market effectively.
 Tesco has to focus on customer satisfaction which helps to increase their brand
value and business expansion very easily.
Legal Structure
 There are many types of private businesses which are limited in liability and
increase the size of the business to compete in the market. Sole proprietor, limited
company, cooperative company, partnerships are types of private businesses.
 Private company have limited liability to the investment done in the
commencement of the business due to spate legal entity concept.
Voluntary Organisation
Voluntary organisations are those which put emphasize on social betterment with
their activities and also improve the development to increase living of standard. These

organisations are the network of volunteers which provide air to society and reduce social
issues without any interference of government. For example, Mencap organisation
provide support to disable citizens and also collects funds from different sources to
provide better future to every citizens effectively (Amos and et al., 2019).
Purpose
 To provide better quality living to all the people in the particular region by support
them with different activities.
 Voluntary organisations are working on moral ethics and do not work for profit
maximisation.
 Improvement of infrastructure, education system, and also support government
activities in order to increase the social betterment.
Legal Structure
 Mencap has increased their trust in the society and also appreciated by UK
government for supporting disabled patients in UK this also helps the organisation
to collect more funding to carry their activities effectively.
 Company is formed by board of trustees which helps to donate funds and also
attract more donations from around the world.
Size and Scope of Different Types of Organizations
Micro Organisation Small Organisation Medium and Large
Organisation
Size Micro businesses are
those which hire less
than 10 employees to
achieve their daily
activities of the
business. The capital
investment of micro
businesses is very less
Small business is those
which are running in
the market. It is
interdependent on other
business organisation
to increase its
productivity. Small
organisation which has
These are the
international business
which operate in
different countries
and increase their
profit margins by
developing new
products and services

and it also reduces the
cost of interest with
higher returns.
less than 500
employees and also
provides better
products and services
to customers to
increase their profit
margins effectively.
which helps to
increase the
satisfaction level of
customer effectively
(Mura and et al.,
2017).
Scope Due to increase in the
demand of customers it
is very essential to
understand the
opportunity to grow in
the market. Increase in
the income level of
customers in UK has
also improves the
market for micro
businesses to innovate
and increase their
market share
effectively. Mencap is
micro organisation
which has the
opportunity to grow by
reducing the cost of
operations and also
innovate their
techniques to conduct
social welfare in UK.
There are many small
businesses in the
market which helps to
increase the
productivity of the
supply chain and
increasing satisfaction
level effectively. there
are many
collaborations which
helps business to grow
and expand in the
market to compete and
gain higher profit
margins effectively.
For example Tesco is
retail store which uses
different products of
other businesses to sell
in the market and
provide better services
to customers and
Large and medium
size businesses are
majorly operating in
global market and are
owned by
government which
helps the organisation
to increase their profit
margins and invest in
the market to grow
business and become
leader in the global
market effectively.

increase customer base
effectively
(Jayasundara and et al.,
2019).
Key
Stakeholders
Stakeholder of micro
organisations is
customers and
suppliers. As the
business is personally
owned by individual
with less capital
investment helps to
increase their
satisfaction level of
business to grow in the
market effectively.
Employees, directors,
government,
shareholders, suppliers,
society in which
business is operating
are the key
stakeholders of small
business organisation.
Creditors, Board of
directors, employees,
government,
shareholders,
suppliers, financial
institutions,
customers are key
stakeholders of
medium and large
organisation to
develop effective
strategies to increase
their satisfaction.
From the above difference of in the types and size of organisation as micro
organisation are majority in UK business which also contribute in the economy of UK
effectively. Increase in the small sized organisation helps UK to increase employment
opportunities and inventions and innovation in the market (Purnama and Subroto, 2016).
This also provides fair competition in the market with medium and large business
organisation. UK government also support small organisation by proving subsidies and
loans to increase the productivity of the market and also increases the products and
services for customers to increase their satisfaction effectively. Growth opportunity for
businesses is very essential due to change in the taste and preference of society this also
impact the quality of products. This also increase encourage many micro and small
business to grow and increase their products to compete with international brands and

also focusing on producing the low cost products for customers to attract them and
increase their satisfaction effectively. Tesco come under small business which operates
in UK market and is providing different household products and services to public.
Change in the technology also helps the small businesses to attract more customers by adopting
that digital technology in different parts of business activities. Digital marketing is one of the
effective tools which helps to increase the customer engagement and is cost effective to increase
the profit margins of the businesses. Large organisation have the potential to compete and
expand in the global market Unilever is effective example of retail industry which produces
consumer products and supply them all over world effectively. there are many factors which also
helps the medium scale business as they provide support to large scale in providing raw material
at low cost and also increasing their profit margins. UK has improved the quality of products due
to high quality of raw material at low cost. This also helps to increase the profit margins of and
employment of the country to boost economy (Belas and et al., 2018).
LO 2
Relationship Between Different Organisational Functions
Increase in the global demand has led to increase in the competition in the market
which has also impacted the internal working of the organisation to achieve its objectives
and develop strategies. There are different functional are in very business which helps
business organisation to analyse all the changes in the market and develop effective
policies to compete in the market and increase profitability effectively.
Marketing and Finance
It is very essential for business to grow and with the help of marketing business
increases the interaction of customers and provides effective communication to increase
sales of the products and services (Ahmadi, Rahimi and Rezaei, 2018). Marketing is
related with finance function as every activity which is done by marketing is funded by
finance department and also develop budget for all the promotional activities by reducing
overall cost to increase the profit margins of business organisation effectively. Finance
department also develops financial statements which improve the decision making of

marketing department to increase customer satisfaction and also achieve objectives of the
company effectively. there are many factors which helps the company to understand the
internal environment of the business. Marketing is very essential which also helps
company to compete and survive in the market and also attract more customers in the
business effectively.
Marketing and HR
Human resources is very essential function is any business as it is the integral part
of business and provide effective management of employees. Hr also develops effective
policies to improve the organisational culture which increases the performance of
employees to achieve the objectives effectively (Alotaibi, 2016). This helps marketing
department to increase their efficiency to by having high performance teams. HR
department provides effective training and development to increase skills and knowledge
of employees according to market research done by marketing department. HR also
provides potential personnel which are required by marketing department to increase the
efficacy and improve satisfaction level of customers effectively.
Marketing and Operations
Operations help to manage all the activities of the business in order to develop
product and services according to demand in the market. Marketing department provide
effective information to operations department about the demand of product or services.
This helps operation department to produce products and procure raw material at low cost
by formulating effective operation management planning. Inventory management also
helps business to reduce the cost of products and maintain the quality with maximum
stock according to demand of customers to increase their satisfaction effectively.
Operation and marketing are also related to meet the needs and demands of customers
and product effective products and services effectively.

LO 3
Positive and negative impact of macro environment
There are a lot of changes which are coming in the market which needs to be analyzed
by the organizations in the market so that they can plan their strategies and take measures
accordingly (Fabus, 2018). The external factors of an organization are not in control of
the business which is why the company will have to take decisions for them. Tesco has
been analyzing the external factors in the market so that they can have a better
functioning for themselves which is going to make the reputation and stability in the
economic factor and for the products and service as well. PESTLE framework is going to
be used in the further for the best analyses for the company.
 Political Factors
There is an interaction of government with the activities which are taking place in the
company which needs to be analyzed by the company. It is due to Brexit the stability in
the governmental activities has changed which are impacting the functioning of Tesco in
the market. There are new trade policies which have come up in the country which is
making it difficult for Tesco to purchase low cost products. Brexit has helped the
company to get higher profit margins in the market by eliminating the small businesses in
the competition of the organization.
 Economic Factors
The factors which are included in this factor are inflation rates, unemployment rate,
foreign exchange rates, interest rates, GDP rates, etc which are having a great impact on
the productivity of the organization in the market. Brexit has reduced the market share of
Tesco due to the inflation which is taking place in the country. The company is being
able to get in employees in low wages because the unemployment rates in the country are
increasing which is a great advantage for the organization.
 Social Factors

There is a great influence of the customers in Tesco because the company has to
produce products which are matching believes, culture and values of the customers only
then the company will be able to have loyal customers. There is a decrease in the income
level of the customers so they do not spend their money on luxury products which Tesco
is not focused on so that the recession in the country can be useful for the company. This
is a great segmentation which the company has created for themselves in the country
which can make the profitability increase and attract more customers. There are new
products which are being developed by Tesco so that they can provide the customers with
low price products which is going to make the company have higher market shares which
is going to be getting the company a competitive advantage (Martins and Nienaber,
2018).
 Technological Factors
There is a technological increase in the company over years which are making the
company have a great advantage for a long run (Tur-Porcar, Roig-Tierno and Llorca
Mestre, 2018). The satisfaction of the customers is high globally which is due to the
technological aspect since the company is being able to fulfill the needs and demands of
the customers effectively. Innovation is also high in Tesco which is a great factor for the
company like online stores and digital technology which are like self check out and etc
which the company has adapted to over years.
 Legal Factors
Equality act, health and safety act which the company is focused on so that there is a
better functioning. There are a lot of benefits which the company is following for the
employees to give their best in the organization so that there is a high productivity in the
organization which can be beneficial for the organization. This increases the job
satisfaction level of employees this is going to make the satisfaction level of the
customers also increase with Tesco.
 Environmental Factors

The company has taken a lot of measures so that they can control the damage they are
creating on the environment (Batocchio, Ghezzi and Rangone, 2016). The company has
taken measures to get zero carbon footprints in this industry which is a great factor for the
reputation of the organization. The environmental taxes which the company is paying the
government is making the limitations on the profit margins of the company which needs
to be improved by the company so that they can expand themselves further with a strong
portfolio.
LO 4
Internal Analysis
It is very important that the organizations which are functioning in the market are
having control on their internal factor or environment of the company so that they can get
a competitive advantage as well as loyal customers in the company (Alotaibi, 2016). This
is going to help the company to make effective decisions for the future and the company
will be able to get higher profit margins. SWOT is a framework which is going to be used
in the further report to analyse the internal functioning of the organization. Strengths
Tesco is the largest retailers in Britain which is a great advantage for the company
which can make the company have a strong base for themselves in the market. Over years
the company has built a strong and large network for themselves which is making the
company successful globally. There is a great focus of the company on the technological
and innovation in the market for the customers satisfaction and loyalty for the
organization. The customer’s needs, demands and the trends in the market keep changing
which is very important for Tesco to maintain there reputation in the market so that the
company can get higher profit margins and better brand recognition. Weaknesses
The company is giving the best of quality of products to the customers which the
company is not being able to make a profit of because they are providing the customers

those products at a low price. It is very important for Tesco to find ways so that they can
have a better functioning for themselves which is going to help the company to have a
better functioning for them (Hamilton and Webster, 2018). There are changes which are
taking place in the company which is a switch card which is being played by Tesco in the
market which is that the information is not reaching the customers and that can be a great
threat for the organization. Financial errors are taking place in the company which is a
great loss for the company because the company is not being able to price their products
effectively which is a very essential factor for the organization. Opportunities
There are a lot of countries where Tesco can expand themselves so that the
organization South Korea, Indonesia, Turkey, etc (Erasmus, Strydom and Rudansky-
Kloppers, 2016). Tesco will have to be using technological changes in the company so
that they can get a competitive advantage like the customers prefer to visit online stores
which are more convenient for them. This is a great opportunity for Tesco because they
will be able to get the satisfaction level of the customers higher in the organization which
is a very essential factor for the company. There are alliances which are present in the
market which Tesco can enter with other brands so that the customers can increase and
the competitors in the market can be defeated. Threats
The competition in the market is growing which is a great threat for the company
because they will not be able to get more customers. The greatest competitors for Tesco
are Sainsbury’s, ASDA, Morrison’s, etc, who have taken away Tesco’s market share
which the company had created for themselves over years (Alaloul, Liew and Zawawi,
2017). This can be controlled by the company by adapting new strategies and methods
for the company to operate in the market. The expectations and the demands of the
customers are also shifting because they want the best in low price. Currently fluctuation
in the currency is another great threat for Tesco which is making the company’s economy

get affected and then Tesco will not have enough to invest in technological aspect or for
expanding in other countries.
Interrelation of external factors and internal factors
The internal environment of Tesco is getting affected because of the political
aspect in the country. After Brexit has taken place in the country there are a lot of laws
and regulations which have taken place in the country due to which the company has
changed the way they operate in the market. There are a lot of restrictions on exporting
and getting in raw materials in the organization for the production purpose. Tesco is an
experienced organization therefore they have taken the best strategy for themselves even
to operate effectively in this situation because they have faced a lot many changes in the
environment of functioning before (Dee and et al., 2019. For the company to maintain
their reputation and their brand image in the market it is very important for the company
to protect the data of the organization effectively. This is going to help the company to
have loyal customers in the company and the company will be able to handle them with
care and best services. The trends and demands of the customers is being well maintained
and managed by the company from time to time which is changing rapidly in the market
because the competitors are getting more variety in the products which are present in the
market.
There are a lot of sales, discounts, offers which are present for the customers of the
company and it is due the help of technology the company is being able to communicate
and make the customers aware effectively. Even the changes in the company are being
told to the customers on time so that the company can have a better functioning for
themselves. The demand for products in the market is also increasing and the company is
being able to meet those because of the help of technology. It is due to technological
changes in the company the pressure on the employees of the organization are also less
which is making the internal environment of the company also effective and satisfactory.
The laws and regulations which are made for the customers and the employees are being
maintained in Tesco which is not just helping the company to have an effective

functioning but also making the people have a better experience in the organization. The
employees are having a satisfaction with the job they do in the company because they are
being paid well according to the law and they have safety and security in the organization
(Liu and et al., 2017). The environmental factor is giving the company strength because
there is minimum wastage in the organization and disposal planning of the company is
also good which is being followed effectively in the company. The image of the company
and the portfolio is very strong which is making the company have more customers and
the company can easily expand themselves in other countries. The company is working
on internal and external factors which can harm the organization to function in the market
so that they can maintain their standards and reputation in the market. The problems in
the organization are also being solved from time to time so that the employees are
satisfied and the company will be able to have a better functioning for them (Safar and et
al., 2018).
CONCLUSION
From the above report it can be concluded that it is very important for
organizations to understand the functioning of the internal and external factors which are
going to impact on the functioning of the company. The competitors in the market are
increasing which is why it is very essential for businesses to have an effective and
efficient productivity in the company so that the organization can have a better
functioning for them. There is a brief description of the size and scope of the industries in
the market as well so that the company can plan accordingly in the market so that they
can have a better functioning for themselves. There are a lot of strategies which are
present in the market so that the companies can have a better functioning but there has to
be a right decision after looking at the internal and external factors of the company so
that the operations in the company does not get affected.

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