Impact of Macro Environment on Business Operations

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Business and Business Environment

INTRODUCTION......................................................................................................................1
TASK 1......................................................................................................................................2
1.1 Different kinds of organisations their size and scope......................................................2
1.2 Analysing Structure and Functions of Organisations.......................................................5
TASK 2......................................................................................................................................8
2.1 Macro environment and its Impact on business...............................................................8
2.2 Internal Strengths and Weaknesses and its relationship with macro environmental
factors...................................................................................................................................10
CONCLUSION........................................................................................................................13
REFERENCES.........................................................................................................................14

INTRODUCTION
Business is a trading process consists of financial activities that are performed to make a
profit out of sales and purchases of products and services. It can be of any type and in any
sector. Every business is affected by its environment in both the ways negatively or
positively. This report is made with the purpose of explaining the business and business
environment in detail. Different types of organizations, their size and scope are discussed
below with examples. The manner in which different organizational functions are associated
with each other is explained here and their connection with the company’s structure. Further
based upon the above-highlighted points and selected organization, the impact of the
environment upon the organization is presented. In addition to impact, the organization’s
interrelationship with the external environment is explained. Burberry is a public limited
company located in the United Kingdom; it is a fashion house having nationwide stores.
Being in the textile industry Burberry has a lot of competitors. The company’s main focus is
on outdoor attire from the beginning.
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TASK 1
1.1 Different kinds of organisations their size and scope.
The organization is the name of an entity that is created with some purpose to be achieved.
The idea was to put things in a systematic order to bring multiple people together. Some
organizations are made with an objective to maximize profit in long run, some are created
with the purpose of serving the general public i.e. no profit from operations and few are
working for both purpose but are non-government organizations. Each business has its own
unique purpose. There are public companies, private companies, sole traders, etc. Types of
organisations are discussed below:
For-Profit Organisations: If an organization is created with a motive of earning more and
more profit then it’s a profit-making entity. Such organisations have to follow the legal
structure of the country (Wickert, Scherer and Spence, 2016). Revenue generated is partially
reinvested in the business to make sure that business is sustained in the industry.
Not for Profit Organisations: These entities are serving the public because they are made
with the purpose of not making any financial gain. Charitable trusts, government hospitals,
schools, railways fall under this category
Non-Government Organisations: NGO’s are companies that also serve social welfare but
they are not managed by the state. Rather they operate on their own, usually non-profit
organizations. NGO’s are companies having projects promoting a specific cause for
development (Byers, Anagnostopoulos and Brooke-Holmes, 2015.).
Micro, Small and medium-sized enterprise; Different purposes, objectives, and supply of
goods and services
The European market is led by big companies but this category of SMEs i.e. small and
medium-size enterprise holds a big share of the marketplace. As per the guidelines entity
which has less than 250 people employed fall under this category. No shareholder can hold
more than 25 percent shares in SMEs. Turnover must not exceed 50 million euro’s and
financial statement must show less than 43 million euro. Sole-traders are part of SMEs and
many private companies also come under this category.
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Legal structures associated with forms of organizations.
Sole-Traders: Such entities are solely held by one person who is liable for all expenses,
losses or owner of all profits earned. A trader is not separate from business unlike in
companies, thus any liability that occurs has to be fulfilled by him (Van Den Berg and Braun,
2017). The owner can use his personal assets in business and business assets for personal use
Partnerships: Such firms are an agreement between two or more parties governed by the
partnership deed. The document contains how profits or losses will be shared among partners,
its structure, scope and liabilities (Greasley, 2017). Firms have unlimited liability like sole
trading business partners can pay off debts from personal assets in the absence of assets with
an entity. Every partnership firm does not have unlimited liability, LLPs are now a common
part of the industry. In such firms, other partners are not responsible for other partner’s
irresponsibility.
Limited Companies: Companies are separate legal entities; referred to as a person in
Companies Act. Promoters or directors are not liable for company debts. Companies have a
constitution that defines its capital and relationship with members. Members are those who
hold some amount of share capital; members are only liable to the number of shares or
amount of guarantee they own. Such organizations are either limited by shares or by
guarantee.
Private Limited Companies: These organizations have a generally small business and
limited by shares. The number of shareholders is fewer than public limited companies, say,
50. Shares of private companies are not traded under the public market (Hamilton and
Webster, 2018). Only directors and members of the company are having the right to buy or
sell shares of such a company. Many SMEs are part of private limited companies because
companies allow them to be free from business liability due to their limited liability concept.
Size and scope of organizations
Difference between small, medium and large enterprises
Small businesses are held by its owner, decision-making power is with trader only. The
owner has the right to choose what goods would be sold or purchased; their quality and price
are decided by the proprietor. This business has its customer base in the local market; funds
are leveraged by personal assets.
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Medium-sized businesses both public and privately owned; decision making power is with
directors or owners of a business. Their customers are from fixed geographical areas or
markets.
A large business is public holdings; they are managed by appointed managers. Mangers are
not responsible for any liability (Lock, 2018). Decision-making power is with assigned
authorities. They have a formal structure and communication system to be followed. Market
share is global in large business .
Global Growth and Developments
With an increase in trade between different countries, most of the companies are expanding
their business worldwide.
Global Organisations: These organizations have business all over the world, and have
significant investments in foreign direct investments (FDIs). Such companies have
headquarters or corporate offices in one country; who has central controlling powers to
regulate operations all other business units globally. Products are also sent by central unit to
subsidiary holdings and developments are made at sub holdings but final decisions are made
at headquarters only.
International Organisations: These companies’ import and export goods in different
countries. They do not have most of the operations in their own country. Goods are sent and
received to and from other countries, though such companies do not have establishments in
other countries. As they do not have any subdivision or branch all the decision making is
completed at home country.
Transitional Organisations: These organizations are some of all international, MNCs and
global companies having operations worldwide. The structure of this company is a little
complex in nature. They have both local and global customers (Wickert, Scherer and Spence,
2016). Such Organisations invest in foreign direct investments and also in countries where
they operate. Decision making is decentralized here; each subsidiary has the power to make
key decisions for their branch. Subsidiaries have the power to make product developments
according to the local market, but with final approval of holding company.
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Difference between Joint venture, Franchising, and Licensing
Joint Venture: It is an agreement between two organizations to accomplish a specific goal;
which cannot be achieved by either of them alone. This business operated until the originally
decided objective is achieved. This project can last according to the time it takes to
accomplish its goal.
Franchising: These are the outlets of some famous brand whose control is with the brand
owner. License is given to franchisee holder for operating business with norms decided by
brand title-holder. Some amount of initial capital is to be invested to take franchisee license
and start a business (Charter, 2017). The best example of this type of business is
McDonald’s; the experience is the same at home or on a road trip.
Licensing: Many of the people are confused with Franchising and licensing as same. As the
owner has the right to control and give license to others to use the grant. Royalty is paid to
the organization by a local company to commence production locally.
Industry and competitive analysis help in designing a systematic strategy. Understanding the
competitive sources and their power in the industry helps in strategy formulation. Porter’s
five forces model is useful for doing industry analysis and Swot is the best tool to analyze the
position of an organization in the industry.
Market forces and Economic Operations
Scarcity of resources and choice of products defines the scope of organizations. Moreover,
the supply of raw materials or goods and their demand must be evaluated. Such that incorrect
strategically decisions are not made. Income Elasticity depends upon demand and supply of
goods, higher the demand, higher the income. Lower the demand, lower the income and vice
versa with the supply of goods.
Stakeholders are part of any organization; they are members, employees, suppliers, people,
the needs of stakeholders have to be kept in mind while making any decisions in the
organization. They are the ones who are responsible for the growth of the company.
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1.2 Analysing Structure and Functions of Organisations
Organisational Structure
Burberry is luxury brand recognised all over world. It is a public limited company located in
London, United Kingdom. Having wide range of fashion clothing like ready-to-wear outfits,
sunglasses, cosmetics, fashion accessories etc. With the objective it’s of satisfying customers
with luxury items. Organisational structure of fashion companies is given below:
Figure 1: Organisation Structure
Burberry has hierarchical structure where significant responsibilities are with managing
director. Further factor manager is responsible for managing every department And so on
(Figure 1). Common functions of business are operations, marketing, financing, and human
resource.
Structure and functions are their interrelationship is explained under:
Operating: This department is involved in managing products and their quality. Quality of
raw material to finished goods is responsibility of this division. Latest and trendy fashion
products are designed to make it look unique.
Marketing: Marketing division ensures that product is well known to public. They promote
goods in local and regional market (Winnubst, 2017). Various activities are conducted by
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marketing team and it requires investment in terms of money and time. Marketing mangers
make sure that each of the age group is satisfies with the brand.
Financing: This team works upon managing monetary resources of company. Information
about funds available with organisation is present with finance managers. They prepare
financial statements periodically and ensure that company is making growth in money terms.
Also, they have to distribute funds to other departments to manage their activities. . They
target upper middle class group to buy more and more products. Majority of its products are
priced between 200 to 1000 pounds.
Human resource: HRM is universal to all organisations; managing workforce is all
important to each and every organisation. HR manager has great responsibility, decisions
taken by manager impacts other operations. The responsibility of keeping or firing employees
is with HR department. Evaluating need of new employees or outsourcing are functions of
HR manger.
Organisational functions and their relationship with mission and objectives
Mission and Objectives: Burberry’s mission statement says that their aim is to provide best
and true quality luxury products to its consumers (Palmer and Biggart, 2017). Retaining their
potential customers by offering them new and changed products immediately is main focus of
Burberry.
Their objective is to make collaboration with best artists all over world to deliver best
services to customers. They are having a great retail marketing plan to expand the brand
effectively in different and new designs. Trench coat was one of the best and iconic product
of all time delivered by Burberry.
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TASK 2
2.1 Macro environment and its Impact on business
Context of Macro Environment
Macro environment is outside the organisation and it impacts organisation and its functions.
Factors of macro environment are government, economy, politics, technology, legal structure
of country and environment. Organisations require keeping track of any changes in external
environment to forecast and minimize the effects of any change in industry. In order to
deeply understand external environment of Burberry Pestle analysis is conducted and
presented below in brief:
PESTLE
Political Factors: Burberry is big organisation not only operating in London but also
operates countries worldwide. Every country has its own laws and rules to be followed by
industry, which may result in creating unfavourable conditions for company. Tax rates also
influence sales and production of company (Abbott, 2015.).
Economic Factors: Inflation, change in interest rates, foreign exchange rates influences
demand of products. Products offered by Burberry are luxury products and they are
connected to status symbol. Cheap marketers copy and sell them in market due to inflation or
change in exchange rates. Labour costs also affect production.
Social Factors: Every person has different tastes and also codes of conduct of dressing
styles. It has to be kept in mind what kind of style is preferred by customers. People from
different communities prefer different styles. Burberry is using social media to attract more
customers such as twitter, Instagram and Facebook.
Technological Factors: Technology is involved in all parts of business, whether it is
production or marketing. To reach out customer technology is used to advertise the products.
Nowadays technology is fast and secure which helps Burberry to make more and more profit.
Online shopping allows more customers across the world to visit store sitting at home and
buy products.
Legal Factors: Burberry has to abide legal laws of many countries within which it has been
operating. Legal laws are sometimes favourable and sometimes unfavourable for business.
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Labour laws Employment laws affects performance of company. Patent rights are must to sell
luxury products in order to be safe from imitators.
Environmental Factors: Environment of business affects its operations, availability of
resources, climate change, pollution are factors of atmosphere. Before entering in any
existing market critically evaluate its environmental standards to avoid future losses.
Positive and Negative impact of Macro Environment on Organisation
Strategies, performance and decisions of business are affected by external environment
factors. Their impact business is both positive and negative.
Political and legal Factors: Change in government, legal laws rules & regulations affect the
business. If interests rates are high prices are increased in result sales are affected. Taxes are
low then it impacts sales positively. Political change holds a high chance of change in market.
Economic Factors: Organisations’ operations worldwide involve economies of various
countries (Abbott, 2015). Thus, internal environment of company becomes complex and
impacts decision making of productions and sales.
Environmental Factors: At some places of production natural resources are easily available
which lowers the costs of production. But, due current environmental conditions natural
resources are scarce, and are non-renewable.
Technological Factors: Innovation in technologies directly affects business. Knowledge of
technological change and skills to operate new machines are must, otherwise it is not easy to
cope with new advancements. Introduction of online market platform has positively affected
organisation; as it has already been working on social networks.
Social Factors and cultural factors: Changing tastes and preference of consumer affects
sales, customer’s values and beliefs decides demand and supply of product. If all things are
kept in mind and products are made it gives positive impact.
Transformation process and overcome resistance to change.
Transformation is process of adding value by an action of group of actions. For example milk
is transformed to butter or cheese; treatment of patient requires health state and medicines. In
such cases it is easy to determine transformation process.
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However in textile industry cotton is used to make thread then cloth then a dress. Machineries
are involved, natural resources, environment are all part of transformation process.
Traditionally labour used to spin jacks and make thread, in modern world machineries has
taken place of human labour. Designs are also made with the use of software’s available over
computers. They are increasingly accepted all over world to make sophisticated designs very
easily.
Change in macro factors transforms the process of production; employees are affected by that
change. Leaders have to make sure that they inspire them to work with advanced technology
and learn new things.
Strategies can be made to motivate workforce, some of them are discussed below in brief:
Make a proper team Structure: Divide responsibilities in team members according to their
skills and knowledge. Considering strengths and weaknesses of members provide them
training program.
Setting up targets: Make specific targets and goals to be achieved by employees within
defined time limit. Motivate them to accomplish their goals and team goals together to reach
organisational targets.
Remain positive: people are nervous if a change is made but it is natural. Employees require a
supportive and positive leader to help them overcome change.
2.2 Internal Strengths and Weaknesses and its relationship with macro environmental factors.
SWOT Analysis
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