Analysis of Business Environment and Skoda Auto's Operations

This report provides a comprehensive analysis of Skoda Auto's business environment. It begins by defining the business environment and examining different types, sizes, and scopes of organizations, including public limited, private, and voluntary sectors. It then delves into the relationship between various organizational functions such as human resource management, finance, sales and marketing, and production and operations, linking them to the company's objectives and structure. The report further explores the impact of macro-environmental factors, such as political, economic, social, technological, legal, and environmental (PESTLE) factors, on Skoda's operations. A SWOT analysis is conducted to identify the company's strengths, weaknesses, opportunities, and threats, and to evaluate how these internal factors interrelate with external macro factors. The report concludes with a summary of the key findings and recommendations for Skoda Auto.

Business and the Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Different types, size and scope of organisation....................................................................3
P2. Scope and size of different types of organisations................................................................4
P3. Relationship between various organisational functions and their link with structure and
objectives of organisation...........................................................................................................5
TASK 2............................................................................................................................................6
P4 Impacts of macro environmental factors on business operations..........................................6
P5 Internal and External Analysis of Skoda Auto with other similar organisation....................8
P6 Evaluate how strength and weakness interrelate with the external macro factors...............10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is defined as the surrounding in which firm performs its operations
with a motive to gain profit. There are number of factors present in the internal and external
environment of company which highly influence the working of its business (Cassell and Blake,
2012). It is important for an organisation to determine these forces and its influence on the
activities of business. Identification of these factors assist the manager in formulating strategies
to deal with them. In the present assignment, given company is Skoda Auto which deals in auto
mobile sector. Company is known for its wide range of products and it is a completely owned
subsidiary of Volkswagen group. The report covers different types, size, scope and purposes of
organisation. It also defines the relationship between various functions of organisation and their
link with the objectives of firm. Apart from this, various factors of external environment and
their influence on the operations of business are explained. Besides this, SWOT analysis of
company to identify strengths and weaknesses and their interrelationship with external factors is
done.
TASK 1
P1. Different types, size and scope of organisation
Main aim of every business entity is to generate high revenues by fulfilling the needs of
customers with their quality products and serve public. Various kinds of activities are performed
by different departments of the firm. Scope of business is highly affected by the size of
organisation. There are different purposes and types of organisations which are as follows:-
Public limited company: Firms which are regulated by the government and whose
complete ownership is in the hands of government, these types of companies are referred as
public limited. In order to satisfy the needs of customers, these entities emphasize on offering
high quality and low priced products. In order to raise funds, company issues its shares in the
market for executing commercial activities (Cavalcante and et. al., 2011). TESCO is an example
of Public Ltd. Co. that takes approval from its shareholders in order to make major decisions.
Government sector is further divided into 3 parts:- Central government: It is an apex body who has the power to control every issue of
nation. Collection of taxes and printing of currency are the activities which come under
central government.

 State government: Main function of this government is to regulate the affairs of a
particular state. For example, in order to promote higher education, various policies and
programmes are framed by the higher authority.
 Local government: All the affairs of a particular area or town are regulated and
controlled by local government. This regime has less authority than central and state
government.
Private company: Those organisations which are owned and controlled by single
individual or group of people are referred as private companies (Cronan and et. al., 2011).
Government has no role in these kinds of firms. These companies offer innovative and quality
products in order to attract customers. Main aim of these firms is to earn high profit. Skoda Auto
is an example of private company which has its strong brand image in the market. It offers high
quality of products to its customers. Private sector is further divided into following:- Sole trader: In this, all the activities of a business are operated by a single individual. The
firm is fully owned by single person who is responsible to bear all the gains and losses of
business. Partnership: In this, two or more than two persons come together and start a business. A
partnership deed which is a written document is signed in between the individuals so that
in future, conflicts will not arise between them.
 Franchising: In this, the person, who is owner of a well-known brand called franchisor
gives the right to sell its products with his brand name to another person called
franchisee. In return, franchisee pay some amount to franchisor for giving him the right to
use its trademark.
Voluntary sector: Those organisations which are formed for the purpose of social
development of people are referred as voluntary firms. Their main aim is to serve the society and
fulfil their basic needs in order to improve their living standard (Elliot, 2011). The example of
voluntary sector is OXFAM who works to remove poverty.
P2. Scope and size of different types of organisations
Public sector organisation
TESCO is a company of United Kingdom which is a public limited firm and deals in
grocery sector. Every year, large amount of profits are generated by the firm. Currently, more
than 5600 stores of company are operates worldwide through which the firm offers services to its

potential customers. Every time, the firm generates high amount of profit. Approx. 450000
employees are working which assist in effective implementation of activities (Hall, 2011).
Company wants to manufacture high quality products and offer it to customers in order to
capture the market share and get loyalty of clients.
Private sector organisation
Skoda is a private sector company which manufactures high quality products and offer to
its customers. The firm deals in auto mobile sector and delivers millions of vehicles in a single
year to the clients. Many outlets of Skoda are present all over the world. £700 is the operating
income of the firm and its profit is £115 million. 80000 and above employees are working in
company. The size of operations of the firm is large. It is the reason behind its positive and
strong brand image.
Voluntary enterprise
OXFAM is a voluntary organisation who works for development of society and to
remove poverty from the nation. Various programmes are conducted by company in order to
resolve the issue such as injustice and poverty. This company provides assistance to those people
who are not able to fulfil their basic needs of day to day life.
P3. Relationship between various organisational functions and their link with structure and
objectives of organisation
Many functions are carried out by an organisation in order to accomplish their targeted
objectives and goals. It is necessary for company to implement all the activities effectively. In
order to enhance the efficiency of business operations and capture large portion of market share ,
it is necessary for the managers of Skoda auto to implement its commercial activities effectively.
The function of an organisation highly rely on the objectives and structure of the company. If
the organisational structure of the company is simple, then the company is able to increase the
efficiency of its operations in a cost effective manner and if the framework is complex, it is
difficult to increase efficiency in its performance (Kaufmann and et. al., 2011). Different
functions of Skoda and its relationship with its objectives and structure are as follows:-
Human resource management function: The department is concerned with managing
workforce and provide them training and development. It plays an important role in the success
of an organisation. The firm should have skilled and knowledgable employees so that they hetp
in increasing the competency of the firm. It is the duty of human resource manager to identify the

gap between existing employees and future requirements of workforce and fulfil this gap by
hiring right no. of employees (Lee and et. al., 2012). The structure of an organisation highly
affects the working of staff. Skoda must have develop clear communication channels within the
workplace in order to remove confusions takes place in the firm.
Finance function: For proper execution of activities, sufficient funds are required. The
firm needs to have enough finance so that day to day operations of the firm are perform
smoothly. Lack of fund creates unnecessary obstacles & delays in the activities. It is the
responsibility of financial manager of Skoda to assess the financial requirements of the firm and
allocate appropriate amount of fund to each and every department of the company. Size of
operations defines its financial needs. More amount of fund is require, if the size of business is
large and if it is small, less fund is needed.
Sales and marketing: It is also an important function for a firm as the company use it in
selling its goods and services in the market. It provides a path to the organisation to interact with
the customers. If this function is effectively running in the business then it will contribute in
increasing its sales and leads an organisation towards higher profitability. Marketing manager of
Skoda needs to work effectively in order to continuously increase the sales of the company.
Production and operation function: Skoda offers high quality and innovative product to
its customers. The company provide luxury cars as its trade good. Customers are fully satisfied
with their product as these are innovative. Labour, capital and equipments are the major
components of process of production. Production & operations manager needs to carefully
monitor all the manufacturing activities so that cost can be controlled in an effective manner.
TASK 2
P4 Impacts of macro environmental factors on business operations
Business environment consists of various internal & external factors which highly affects
the activities of the firm. Internal forces are found inside the organisation as strengths,
weaknesses, opportunities and threats (López-Gamero and et. al., 2011). External factors exists
outside the firm as political, legal, environmental, social, economical and technological
components. The firm can not control the factors of macro environment and it highly influence
the operations of an organisation. Determination of these factors & its influence is necessary for
the managers of Skoda. The firm use PESTLE analysis to identify the influence of external
forces on business surroundings (Onetti and et. al., 2012).

PESTLE Analysis:-
Political factors: These factors highly influence the working of the firm. Laws, regulations and
policies made by the government related to the functioning of business, to maintain economic
balance of the country. The manager needs to consider these laws and must be followed by the
organisation. For instance, in 2010, United Kingdom made some laws which leads the country
towards financial crisis.
(Source: PESTLE Analysis of Skoda, 2011)
Economic factor: This force influence the environment of business in positive as well as
negative manner. Some economic factors like interest rates, inflation, loan rates, deflation, fiscal
policy etc. are important factors include in it. All these factors should be assessed by the
managers of Skoda before the expansion of business (Owusuand and Habiyakare, 2011).
Social factors: These factors includes lifestyle, needs, habits, tastes of individuals,
beliefs, behaviour etc. In order to satisfy the needs and wants of customers and capture large
portion of market share, it is essential for the firm to consider these factors. Skoda can generate
higher amount of profit with the assistance of these factors.
Technological factors: Now a days, needs of individuals are changing rapidly and every
person wants new and innovative products to satisfy their needs. Changes in technology highly
Illustration 1: PESTLE Analysis

affects the production and operational activities of the company. Adoption of new technology
assists the firm in producing innovative and high technology products in order to attract
customers more towards it (Palo and TähtinenSaleem, 2017). Skoda use high technology
equipments to produce their product.
Legal factors: Government set some standards and rules for organisations in order to
improve quality of products, which they should have to follow. These regulations help the firm
in making quality products for the customers. But at times, these rules acts as obstacles and
hamper the smooth functioning of business. For instance, strict regulations of UK government
encourage Skoda to use ethical and standard process of production.
Environmental factors: Increased awareness of customers about environment encourage
the firms to use high quality of raw materials and production processes to produce products so
that it cannot harm the environment. For instance, increased concern of customers towards
environment
encourage firm to make good quality products.
In this way, all the factors are interrelated with each other and influence the activities of
the firm.
P5 Internal and External Analysis of Skoda Auto with other similar organisation
SWOT Analysis helps to identify the external and internal factor that affects the business
operation. It refers as a competitive evaluation tool that helps to determine company's strength,
weakness, opportunity and threats (Teece., 2012). With SWOT Analysis, Business entities are
able to know where are they lacking so that they can take corrective measures which improves
their overall performance. Along with this, it also provides competitive advantage to the firm
over their competitors.
Described below is the SWOT Analysis of SKODA AND NISSAN Motors which described as
follows:
SKODA AUTO NISSAN MOTORS
Strength:
 Main objective of SKODA is to make
their customer happy so that they enjoy
riding in SKODA rather than focusing
Strength:
 Main objective is to maximize their
sales and profitability ratio. Thus,
aiming at generation of sales rather than

on increasing their sales and revenues
numbers.
 Adopting upgraded technology in their
production process such as EBS, MSR,
anti-skid braking.
 Strong Brand Image in Europe and UK
market
 Variants available in wide range.
satisfying their customer.
 Holds greater portion in Truck
manufacturing which SKODA is not
 Excellent Brand Image globally.
 Also using new technology
 NISSAN deals in manufacturing SUVs
which SKODA is not dealing with.
Weakness:
 Competition is extremely stiff.
 Lesser control on emerging economies.
 Maintenance cost is high as compared
to other AUTO Industry.
Weakness:
 Market share is limited due to excessive
competition.
 NISSAN does not deal with the luxury
segment(Welter and Smallbone, 2011).
Opportunities:
 Hybrid cars and cheaper variants
entitles them to increase its market
share.
 SKODA aims at collaborated with
other Auto-mobile Industries which
proves to beneficial for them (Antones,
2015).
 Augmenting production capabilities
which enables them to produce more
cars.
Opportunities:
 Manufacturing fuel efficient and hybrid
cars which serve as an advantage for
them to deal in future accordingly.
 Strong Hold on geographic region
because of their joint venture with other
auto-mobile industry.
 Focuses on expanding its market share
in future by 8%
 They hold large share in manufacturing
green cars which serves great
competitive market for NISSAN.
Threats:
 Frequent change in technology.
Threats:
 Increase in green cars leads to reduce

 Facing intense competition at
international level.
 Other competitors launches new
product moderately at low prices.
the sale of other cars
 Competition from other market leads to
decline its market share
 Various Government policies and their
regulation may affect the demand of
NISSAN Motors.
P6 Evaluate how strength and weakness interrelate with the external macro factors
In order to identify the inter-relation of strength and weakness of SKODA AUTO with
its external factors, the following company can apply PESTLE Analysis. It helps to identify how
the external factors affecting the business operations of SKODA AUTO. PESTLE compromises
of:
Political Factor: Such factors generally deal with the rules and regulation of government
comprises for the sake of local residents (Bridgey, 2015). Political decision may affect the
overall sales and revenue of cited company. Changes in taxation, law related to environment,
accounting standard may affect the business operation of SKODA at international level. Thus,
SKODA is require to monitor all the changes that takes place in context of government rules and
policies such that to gain higher competitive edge all across the globe.
Economic Factors: Factors such as inflation rate, interest rate may affect the overall profitability
of the company (Thomas, 2014). SKODA operations can be affected by the change interest rate.
In future, SKODA aims at collaborating with other auto-mobile industries, thus they are require
to look after their interest rate and develop sustainable overall interest rate.
Socio-Cultural Factors: SKODA aims at manufacturing those cars which makes their customer
happy rather than maximise their overall sales. SKODA provide great employment opportunities
to the personnel as their main objective is increase their market share at international level. For
this, SKODA needs to open their multiple outlet at different countries which automatically
generates the vacancy for new recruiters. Further, they also focus on providing adequate training
to them which enables new trainee to grow effectively and efficiently.
Technological Factors: SKODA is adopting the new technological innovation which enable
them to create higher competitive market share as compared to their competitors. SKODA is

using upgrading technology in manufacturing anti-skid braking, EBS, MSR cars. By adopting
technological advancement, SKODA can gain higher competitive advantage over their
competitors. SKODA is generally focus on manufacturing branded cars, thus makes SKODA to
modify their technology as per the dynamic changes. Also the cited company aims at augmented
manufacturing or production capabilities which enhance their overall probability.
Economic Factors: Various environmental factors in terms of climate, weather can affect the
practices of SKODA. SKODA are require to manufacture their product in such a way the doesn't
affect the environment . Their production process aims at using fuel efficiency cars effectively.
Legal Factors: Laws related to the environment , discriminatory, health safety and employment
may affect the overall business operation, production constructively (Mastruzzi, 2014) . SKODA
is possess all applicable rights related to the nature of business entity in terms of their new
innovated product.
CONCLUSION
As per the given assignment it can be concluded that both internal and external factor has
a strong influence on the operation of business entities. Every organisation whether public,
private or voluntary perform in a similar way which helps them to gain competitive advantage
over their competitors. Along with micro and macro factors, organisation business environment
also deals in satisfying their consumer effectively and efficiently. SKODA is aiming to satisfy
their client rather than maximising their sales ratio. The demand and supply of company depends
upon its external factors which may include stake of several shareholder such as government
bodies, suppliers, competitors. It also provides direction and continuous development and
learning process to various activities of company which provides them stability at international
level.

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