Internal and External Factors Affecting Businesses

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BUSINESS AND BUSINESS
ENVIRONMENT
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Table of Contents
INTRODUCTION......................................................................................................................................................... 3
LO1................................................................................................................................................................................... 4
P1................................................................................................................................................................................. 4
P2 & M2..................................................................................................................................................................... 8
LO2................................................................................................................................................................................... 9
P3 & M2..................................................................................................................................................................... 9
LO3................................................................................................................................................................................ 11
P4 & M3.................................................................................................................................................................. 11
LO4................................................................................................................................................................................ 17
P5 & M4.................................................................................................................................................................. 17
P6............................................................................................................................................................................... 21
CONCLUSION............................................................................................................................................................. 22
REFERENCES............................................................................................................................................................ 23
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INTRODUCTION
Business & business environment is the study in which learner gets the knowledge about
various internal and external factors affecting business activity of business organization
such as customer’s need and expectations, employees, technology, demand and supply,
owner, government etc. the concept and various aspects of the business and business
environment significantly benefits business organization in order to understand specific
factors that affect business and with respect to it, business strengths, weaknesses, threats
and opportunities been identified (Pearson, 2017).
The assignment is divided into multiple parts in which first part presents the knowledge of
different types of organization with respect to their size, structure and scope. The various
types of the organization include private, public and voluntary organization which is in this
assignment is Virgin Atlantic, Doritos and Oxfam respectively.
The second part of this assignment is presented an internal and external analysis of the
Virgin Atlantic that through effective tools in order to identify business strengths and
weakness as well as how these external and internal factors affect business activity such as
decision making of Virgin Atlantic (Sarsby, 2016).
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LO1
P1
The organization is a structure that creates for the business practice and achieves business
and mutual goals and objectives. Following are the detailed overview of public, private and
voluntary organization:
Figure 1: Types of organization
Source: Wetherly & Otter, 2014
Public organization
The public organization is the type of organization that generally operates and manages by
the government of the country. The government takes all the initiatives and makes all the
decisions with respect to the business activity. The main and ultimate aim of the private
organization is to provide good services at an affordable price to the customers (Pearson,
2017). The public organization does not seek to generate profit instead they help the
community through providing support.
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Example: Doritos is a public sector business organization founded way back in 1964 totally
owned subsidiary of PepsiCo. The company deals in food products such as flavoured tortilla
chips which is it's one of the main product.
Figure 2: Organizational structure of Doritos
Source: Mills and Smith, 2011
Private Organization
Private organization are run and managed by individual people and group where the
government has no right to interfere in business activity until and unless the business is
illegal. The decision-making of business activities is also done by owners and top
management. The ultimate and main aim of the organization is profit maximization and
growth of the business organization (Allen, 2013). The company provides the best quality
of products and services as they charge a little bit higher compare to the public
organization.
Example: Virgin Atlantic is a private organization founded in 1984 in England. The
company is one of the top airline companies in the world that covers multiple countries for
its business activity. The company has over 8500 employee works in its airline business.
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Figure 3: Organizational structure of Virgin Atlantic
Source: Ballard et al., 2012
Voluntary Organization
The voluntary organization also called voluntary group or union formed to achieve the
mutual purpose. Generally, the purpose and aim of the voluntary organization are to
provide support with the society and work for the welfare of society. They raise funds
through donations made by the public and investors. The aim of the voluntary organization
is the same as a public organization but they have a specific purpose for which they formed
an organization and to achieve that purpose is the ultimate aim of this type of organization
(Beringer et al, 2013).
Example: Oxfam is a voluntary organization founded in 1942 in England whose main aim is
to the alleviation of global poverty. It is a non-profit organization that works for the welfare
of society.
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Figure 4: Organizational structure of Oxfam
Source: Borkar, 2013
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P2 & M2
There are basically 3 types of organization which is a private organization, public
organization and voluntary organization that falls under micro business, small business,
medium business organization and large business organization. Following are the size and
scope of the micro, small, medium and large organizations:
Micro Organization
The micro organization is limited to a very small area in which there is a maximum of 10
members including the owner. To be having Micro organization the turnover amount
should be £2 million. The micro organization includes generally retail clothing shops etc.
the micro-organization are generally private organization and their main and ultimate
goals is profit generation in order to maintain sustainability (Buccirossi et al., 2013).
Small Organization
Small organization are bigger in size compared to the micro-organization as it has over 10
and under 50 members works for it. The size and scope of the small business organization
are very broad as in the UK over 99% of the organizations are small organizations. These
organizations are also is private organization generally whose main aim was also profit
maximization.
Medium organization
The medium organization generally works as a mediator between the small, micro
organization and large organizations. The main aim of a medium organization was to
maintain sustainability for the long term business. The maximum employee that can work
in Small organization is under 250 and over 50. In the UK only .3% organization are
medium organization (Carraro et al., 2013).
Large Organization
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The size and scope of a large organization are very broad as their ultimate and main aim
was to capture and covers all the area of market. the organization can have over 250
employees and expands its reach on to world leave.
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LO2
P3 & M2
The Virgin Atlantic has various organizational functions such as finance, marketing, human
resource management and sales. All the functions are very important for the business
activity and interrelated to each other.
Functions of the Virgin Atlantic and their interrelationship with other functions
Marketing Function
Marketing is one of the main functions of the Virgin Atlantic as they are responsible for the
promotion of business products and services. The marketing function is interlinked with
finance department and human resource department as in order to hire few extra hands
the marketing department needs to inform to the HR department and for the marketing
expenses, they have to report to the finance department (Davies, 2012).
Sales Function
The sales function is also linked with the finance department as the sales department needs
to inform about the sales record to the finance department in order to properly manage the
financial activities of the business.
Finance function
The finance function is interrelated with every function as the ultimate role for the finance
function is to create a budget for every department which directly linked every department
with it.
Human resource management function
Human resource department is responsible for the employee growth and development of
all the employees within the business organization (Day and Reynolds, 2011). The HR
department is also interlinked with all the departments as all the departments have to
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inform the HR department in order to request for training and development sessions as
well as for hiring new recruits.
These all organizational function are interlinked to each other as well as linked to
organizational function and organizational structure as these functions present the
structure of the organization which altered and change into Matrix organizational structure
due to interlinked of various organizational functions (Johnson, 2014). The business
objectives such as profit maximization and provide good services to customers are also
well achieved by the interrelationship of the organizational functions. Following are the
advantages and disadvantages of the interrelationship of organizational functions:
Advantages
 Interrelationship of organizational functions leads to team co-operation as multiple
departments' works together to achieve a mutual business goal.
 Interrelationship of the organizational function increase business efficiency and
productivity.
 The interrelationship effectively saves the cost of the business organization as
individual have multiple responsibilities that help business in order to save extra
money and maximize profit.
 It helps business organization in controlling as the work can be done by the multiple
skilled employees that help in order to increase the quality of work and can have
effective control on work.
Disadvantages
 The interrelationship between organizational function leads to confusion as an
individual have to report to multiple supervisors.
 It also leads to conflicts between organizational functions as all functions have
different methods of working.
 The interrelationship of the organizational function is time-consuming as one
function have to wait for another in order to complete the work.
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LO3
P4 & M3
The macro factors affect directly on the business organization as external factors such as
demand and supply, political conditions hugely influence business activity. It is very
important for the business organization to assess those external factors and plan
accordingly. PESTEL analysis is a very effective tool for the external analysis affecting the
business activity of Virgin Atlantic (Magretta, 2011).
PESTEL ANALYSIS
PESTEL analyses assess external factors effectively as it covers all the areas that can affect
the activity of business organization externally. The PESTEL includes political factor,
economic factor, social factor, technological factor, environmental factor and legal factor
that influence the business environment externally.
Figure 5: PESTEL analysis of Virgin Atlantic
Source: Mills and Smith, 2011
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