Business Environment and Organizational Functions Report

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Business and Business environment

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Table of Contents
Introduction....................................................................................................................................3
Task 1: LO1: Explain the different types, size, scope of organisations.....................................3
1.1 Public Limited company.........................................................................................................3
1.2 Voluntary organisations..........................................................................................................3
1.3 Private organisations...............................................................................................................4
1.4 Sole traders...............................................................................................................................4
Task 2: LO2: Interrelationship of various functions in an organisation and relation of the
same with organisational structure..............................................................................................4
2.3 Relation between different organisational functions and departments..............................6
PESTLE Analysis...........................................................................................................................7
SWOT Analysis..............................................................................................................................8
Conclusion......................................................................................................................................9
References.....................................................................................................................................10

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Introduction
According to Martin, (2019) business environment is a collection of both the internal and the
external factors which are responsible for shaping of the overall strategic decisions of an
organisation. It is easy to start a business with few amounts of resources however it is not easy to
smoothly continue the same if the internal and external environment factors are not managed
properly. The current report will focus on assessment of the types of businesses that will be
prospective clients of the Metro Bank and will also evaluate the effect of the macro factors on
the business operations. Further the report will also assess the internal strengths and weaknesses
of the macro environment factors in any business segment.
Task 1: LO1: Explain the different types, size, scope of organisations
Organisations are generally of different types which can be differentiated as per the size, scope
and legal procedures that are followed by the organisations. The major types of organisations
include Sole proprietorship, partnership, private companies and public or voluntary companies.
1.1 Public Limited company
The companies whose shares are made available to the public for sales and issue are known as
public limited company. Minimum number of members is 7 who can start a public limited
company.
Advantages:
 Quick access to capital from sell of shares to public
 High rate of liquidity since shares can be bought and sold anytime
Disadvantages:
 Since companies are listed in stock exchange hence the regulations are stringent
 Lack of transparency about company operations to public makes it difficult for the public
to trust the company
1.2 Voluntary organisations
Voluntary organisations are generally created by a specialised group of individuals voluntarily
for social purpose or some economic developmental purpose.
Advantages:
 The major benefit is there is no cost of labour and no cost of production since these
companies deal with social works and are generally run by people who voluntarily
participate without asking for any remuneration.
 This companies are not profit oriented hence no legal or coporate tax is required to be
paid
Disadvantages:

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 It is difficult to find volunteers who are ready to participate in these types of
organisations
 These companies are majorly dependent on donations and government funding in order to
run their operations
1.3 Private organisations
Private organisations are the companies where the shares are not issues to the common public
rather the shares are limited within the shareholders and the board members. Martin, (2019)
stated that unlike public sector, the private company can be started with 2 members only.
Advantages:
 Private companies are bound by limited number of shares
 The companies can take helps from Foreign direct investment and the tax rate for these
companies are less as per corporate laws
Disadvantages:
 In case of financial issues or liquidity issues, the company being insolvent is required to
close its activities and wind up the operations
 Private company does not have the option of getting its shares listed in any stock
exchange and hence no external funds can be collected.
1.4 Sole traders
The type of organisation which is solely or only owned and operated by a single individual is
known as sole proprietorship. In this type of organisation there is no legal distinction between the
owner and the business.
Advantage:
 Since there is single owner hence the orders are given by the owner and privacy can be
maintained in case of business operations
 It is easy to change the legal structure of sole proprietorship companies
Disadvantage:
 The tax amount is a burden since there is no partner or shareholder to share the burden
 The owner will be required to bear all risks related to the business and the business will
be closed as soon as the owner dies
Task 2: LO2: Interrelationship of various functions in an organisation
and relation of the same with organisational structure
In this case two distinct organisation types namely the public limited companies and the private
limited companies have been selected as a part of the prospective clients of Metro retail bank.
The following evaluation of the organisational structure of these two types of companies and the
inter relation of the departments will show the difference between the two types of companies.

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2.1 Oganisational structure of public limited companies
Every public sector organisation has the common typical structure as shown in the figure below
which consists of the board of directors, chief executive officers, managing directors and the
departmental heads. Since there is no maximum limit to the number of employees, hence a
public limited company is entitled to have as many numbers of departments as required for
smooth operations. The organisational structure clearly shows that the Board of directors have
the primary role and all other departments are required to report to the Board members. The chief
executive officers and the audit teams are generally directly under the Board and the members
are recruited by the decision of the board (Cii, 2019). Since the public companies are required to
report corporate taxation hence a separate auditing department is maintained. The figure below
shows the four major operations head reporting to the CEO namely the managing director
branch, managing director product business, Finance director and head of corporate affairs.
Further below these departmental heads the small departments are present who report directly to
these departmental heads. Thus Webb, I. and Martin, G., (2017) stated that in public sector
organisations the lower most level of employees do not have the opportunity of interacting with
the board members and are required to maintain the chain of command while reporting.
2.2 Organisational structure of private limited companies
In case of private companies, the organisation structure is somewhat similar to that of public
companies however here the lower level employees get the opportunity of interacting with the
upper level management that is the Managing director. Since the private company is generally
owned by a particular individual at the beginning hence instead of a board of directors, at the top
of the structure the managing director or the owner of the company is present. The figure given
below shows those two most important departments are directly under the Managing director
namely the Finance director and the production director. The sub departments like the finance

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and production department are under the managing director and generally reports directly to the
managing department.
2.3 Relation between different organisational functions and
departments
The evaluation of the different department shows that the in case of public sector organisations
the working of the lower level department is interconnected with the upper level department and
the board of directors. On the other hand stated that the decision of the board of directors effects
directly and indirectly the well being of the employees working at the lower segment of the
companies. The assessment of the organisational structures of both public and private sector
organisations shows that both types of companies maintain hierarchical structure and thus the
line of command flows from the top to the bottom level employees. Sulimierska and Miele,
(2017) stated that previously the departments like finance and marketing were considered to be
poles apart due to the type of jobs that these organisations do, however with the advent of time it
has been seen that these two departments along with the production department are interrelated.
In case of private companies, the depending on the forecasts made by marketing department
about the product demand, the production department focuses on making decision in relation to
production of the goods. Further the finance department is also related with both marketing and
production department because the estimated budget is made depending on these two
departments.
In case of public organisations although there is interdependency among the various departments
however the departments do not communicate openly with each other and work as per their own
wishes.
LO3: Contemporary examples of positive and negative influence and impact that macro
environment factors have on business operations

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According to Bouma, Jeucken and Klinkers, (2017) a detailed analysis of the macro environment
or the external environment factors helps in determining the external nature of the business.
Since the external market is ever changing in nature hence it becomes difficult for the companies
to adapt to the changes if the political, social, economic, environmental, legal and technological
factors are not analysed completely. The following Pestle analysis of the selected company will
highlight the effect of these factors on the business environment.
LO4: Internal strengths and weaknesses of specific business and their relationship with external
macro factors
PESTLE Analysis
The METRO BANK being one of the most active banks in the region of the United Kingdom
that operates in the retail sector, will have to analyze and evaluate the factors that affect the
external and the internal environment of the firm. The PESTLE analysis helps in understanding
the various factors that affect the external environment of the firm. Since it has a diverse and
well-connected series of services it should also carry out efficient research that will help it to
gain competitive advantage as compared to the other competitors present in the banking sector in
the United Kingdom for its long term and sustained growth.
Political Environment and Factors
A number of new capital rules have been incorporated in the political context since the year 2016
that can affect the bank. There has been a surcharge for the banks that also have branches which
have affected all of the banks working in this sector (Cii, 2019). However, the largest political
wave of shock that caused the fluctuations and instabilities in the political environment of the
firm recently has been the occurrence of Brexit such that it has caused a lot of uncertainty and
economic upheaval for the firm.
Economic Environment Factors
In this context too, the movement of United Kingdom away from Europe has caused a substantial
barrier for the banks operating in this region including the METRO BANK. The economic
relations in the banks that exist in between the different economic entities including the
government will undergo an ample amount of change (Schiereck, Kiesel and Kolaric, 2016).
There can also be a larger decline in the value of the pound against other currencies of the world
which can also impact the predictive analysis carried out by the bank earlier (Howarth and
Quaglia, 2018). The economic impact on the bank will also be highly unstable and full of
fluctuations because of the changing interest rates of the banks in a frequent manner.
Social Environment Factors

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The social environment in which the firm operates is conducive up to a large extent towards the
functioning and operation of the firm in the long run (Webb and Martin, 2017). This part of the
environment includes the demographics and the lifestyles of the people and the citizens that
occupy this region such that the most potential threat in this context in the United Kingdom is the
ageing population which will cause the bank to pay larger amounts of pension to the ageing
population (Sulimierska and Miele, 2017). However, this form of a shift in the activities of the
bank is being expected to increase the amount of saving along with the wealth and investment
management activities in the long run.
Technological Environment Factors
The banking and financial sector in the United Kingdom has been successfully able to make use
of the high amounts of digitalization and technological improvements that has been brought
about as a part of the entire globalization process (Bouma, Jeucken and Klinkers, 2017). It has
enabled the banks to carry out most of its functions and provide services online which is
conducive to the low cost incurrence and time saving of the bank to a large extent. The financial
markets have been simplified by the usage of such technological services and digitalization
(Martin, 2019). The offerings provided by the bank have improved as a result of the capabilities
of the bank that are mobile in nature currently. The operational burden of the bank is to be
reduced to a substantial extent with the use of information technology and other forms of
digitalization.
Legal Environment Factors
A number of law suits are being defended by cost of the banks operating in the financial and
banking sector in this region such that a number of bonds issued and sold have to be monitored
as per the changing systems of the government (Sun, Mohamad and Ariff, 2017). Moreover,
some of the legal claims in the banking sector requires to be settled with large sums of money
which also need to be considered by the bank so that it is able to operate in adherence to the
existing laws of the region in the corporate context.
Environmental Factors
The environmental factors though not directly impacting the external operational environment of
the firm, is affecting it to some extent such that there has to be a transition towards a state of
economy that uses low amounts of carbon so that the firm is able to operate in a sustainable
manner (Meslier, Risfandy and Tarazi, 2017). The variables like the air quality and natural
habitats need to be taken care of by the bank through the use of corporate social responsibility
(Vives, 2017).
SWOT Analysis

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This particular analysis helps in identifying the factors that impact the internal environment of
the firm such that the firm is able to use all the factors in a positive manner for the long run
growth and improvement of the firm. This is represented in the form of a table as follows:
STENGTHS WEAKNESSES
As it is extremely active, the bank is able to
gather the maximum amount of support from
the government. The risk profile of the bank is
also improved as a result of its dependence on
wholesale funding as it works in the retail
sector
There has been a lot of adverse impact on the
operational capabilities of the bank because of
political and economic instability which has
restricted some amount of operations for the
bank
OPPORTUNITIES THREATS
The bank can take up decisions of selling parts
of its business and expand other operations
overseas to new regions so that the scope can
be increased as a whole.
The largest amount of threat for the bank still
lies in the context of the instability in the
political and economic context that is going to
occur because of Brexit.
Conclusion
Thus in order to conclude it can be stated that the bank is operating efficiently and to carry out its
operations in a more efficient and effective manner, it should adhere to the legal requirements
and carry out predictive analysis so that the probable threats can be avoided and the opportunities
existing can be identified and make use of in a systematic manner.

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References
Bouma, J.J., Jeucken, M. and Klinkers, L. eds., 2017. Sustainable banking: The greening of
finance. Routledge.
Cii.co.uk. (2019). [online] Available at: https://www.cii.co.uk/media/5421527/cii-cicero-
political-risk-report.pdf [Accessed 6 Jun. 2019].
Howarth, D. and Quaglia, L., 2018. Brexit and the battle for financial services. Journal of
European public policy, 25(8), pp.1118-1136.
Martin, C. (2019). The impact of regulation on the UK finance sector. [online] Cobalt
Recruitment. Available at: https://www.cobaltrecruitment.com/news-blog/item/the-ripple-effect-
impact-of-regulation-on-the-uk-finance-sector [Accessed 6 Jun. 2019].
Meslier, C., Risfandy, T. and Tarazi, A., 2017. Dual market competition and deposit rate setting
in Islamic and conventional banks. Economic Modelling, 63, pp.318-333.
Schiereck, D., Kiesel, F. and Kolaric, S., 2016. Brexit:(Not) another Lehman moment for
banks?. Finance Research Letters, 19, pp.291-297.
Sulimierska, M. and Miele, A.A.A., 2017. An investigation how quantitative easing programme,
Vickers’ ring-fencing regulation and the ‘Brexit’announcement impact on UK banking
sector. International Journal of Empirical Finance, 5(3), pp.155-166.
Sun, P.H., Mohamad, S. and Ariff, M., 2017. Determinants driving bank performance: A
comparison of two types of banks in the OIC. Pacific-Basin Finance Journal, 42, pp.193-203.
Vives, X., 2017. The impact of FinTech on banking. European Economy, (2), pp.97-105.
Webb, I. and Martin, G., 2017. The effect of banking and insurance on the growth of capital and
output.