Business and Business Environment: Macro Environmental Analysis Report

This report provides a comprehensive analysis of the business environment, encompassing various organizational types (private, public, and voluntary) and their respective purposes, sizes, and legal structures. It delves into the significance of organizational functions like finance, human resources, and marketing, highlighting their interrelation and impact on achieving business objectives and organizational structure. The report also explores the impact of the macro environment, including political, economic, and social factors, on business activities, using Tesco and Marks & Spencer as case studies. Furthermore, it examines the interplay between internal strengths and weaknesses with external macro factors, utilizing PESTLE and SWOT analysis. The report underscores the importance of understanding these elements for effective business strategy and decision-making.

Business and business
environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
P 1- Different types and purposes of organizations.....................................................................3
Size and scope of different types of organization........................................................................4
P3- Difference between various organizational function and their link to organizational
objectives and structure...............................................................................................................5
LO3..................................................................................................................................................7
P4 Impact of macro environment on business activities.............................................................7
LO4................................................................................................................................................10
P5 Internal and external Analysis..............................................................................................10
P6 Strengths and Weaknesses interrelates with external macro factors....................................11
CONCLUSION..............................................................................................................................14
REFERENCES................................................................................................................................1

INTRODUCTION
Business environment refers to the collection of all business factors such as external and
internal factors that can affect business of the organization. These factors include clients,
management, workers, technological changes, economic changes and political changes etc. There
are different types of organizations – private, public and voluntary. All of these have different
purpose, size, scope and legal structure. PESTLE analysis is used to analyse different internal
and external factors of organization. This report describes key points of SWOT analysis in
different companies and also explains interrelationship between organizational function and
organizational structure.
MAIN BODY
P 1- Different types and purposes of organizations
There are different types of organization in different sectors – private, public, voluntary
organization.
Private organization :
It is a type of organization which is operated by individuals or or any particular company
to earn profit. It is not controlled by government or state.
Purpose :
The main purpose of private organization is to earn profit and to create wealth and value
for the company. Another purpose of this type of organization is to set up monopoly in the
market and acquire more and more customers.
Legal Structure :
In private organization legal structure includes ownership and business management
which is managed by private personnels. It is developed by private individuals. It is organized in
different way. In private organization, business owner is only responsible for profit and debts.
Owner is accountable for profit and losses.
Example :
Tesco is the example of private organization. It is a retail organization in United
kingdom.
Public organization :
It is a type of organization which is run and owned by the government authorities. It
provides services to citizens. It is also a non profit organization.

Purpose :
Main purpose of these type of organization is to provide public services. Public
organizations always try to provide best and cost effective services to public. Another purpose of
organization is to use rare resources effectively to increase productivity of nation.
Legal Structure :
All the functions of public organizations are operated by central and local governance.
Public organization is funded by the government authorities. They only provide public services.
They do not work for profit.
Example :
BBC( British Broadcasting Corporation) is the example of public organization. It works
under British Government. It is working in 'Mass Media' industrty.
Voluntary Organization :
It is called as Non Government Organizational. Various NGOs are the example of it. It
includes volunteers that work for the company but do not get paid by the company.
Purpose :
The main purpose of voluntary organization is to accomplish their mission and goal for a
good a cause. They do not work for profit. Their goal is to benefit society.
Legal Structure :
In terms of legal requirement, legal structure is different from other organizations. There
are Beneficiaries, directors and volunteers/staff. Volunteers play a significant role in voluntary
organization. They do not work for profit. It is partially regulated. They get charities from
various sources.
Example:
Example of voluntary organization is British Red Cross. It was established in 1870 with
more than 32000 volunteers. It helps people in problematic situations and crisis.
Size and scope of different types of organization
There are different types of organizations. All types have different size, scope and structure.
Small organization :
These types of organizations usually have simple management structure. There are fewer
employees in this type of organization. Small organizations normally have 10-50 workers. There
are fewer levels of management in this type of organizations. Small enterprises need less amount

of investment or capital. Organizational structure is quite simple in these type of companies.
They are more labour intensive. Some examples are- machinery repair shop, small grocery store,
small manufacturing firms etc.
Scope of small organization :
There are various business activities found in small enterprises. The scope of these types
of industries are vast because it provides it helps in boosting economy. It also increases
employment. Entrepreneurship is also increasing with the development of small enterprises.
Medium size organization :
Medium size enterprises have more 100 to 250 people or workers. Their organizational
structure is more complexed than small size enterprises. Various business activities are
maintained by related departments. Example of medium size companies are verdant Leisure,
Giacom and Pharmacy2U etc.
Scope :
Medium size enterprises have immense scope in the UK economy. It can increase the
GDP of nation as well as it can boost the economy. There are various medium size enterprises
that can grow in future with the help of appropriate efforts.
Large size organization :
Large size organizations have more than 250 workers. They have more complexed
structure than medium enterprises. These types of organizations have large projects, higher
number of employees and more business activities. Various rules and regulations are present
related to company's culture and business operations. Tesco is an example of large size
organization.
Scope:
Large organizations can control bigger share of market. Organization can manage large
base of employees. These companies have complex hierarchy structure so effective
communication is used.
P3- Difference between various organizational function and their link to organizational
objectives and structure
Organizational functions can be called as business process or set of activities within
different department of a company. These functions include marketing, operation management,
human resource and finance etc. There are various functions in a company and to achieve aim

and objective it is important to manage all business functions efficiently. There are various key
elements in every business.
Factor of production:
To create a new product and service, company have to combine various resources like
capital, labour and material and information. For production process, each and every element
should be combined.
Finance function :
Finance department manages the overall functions of finance. Department keeps all
electronic information related to money received and paid. These informations are used to
produce financial statement for the company. The information also can be used to help senior
management to plan and analyse various business strategies.
Human resource functions:
Human resource department is responsible for recruiting, selection, training and
development of workers. All of these activities help employees to increase their performance. It
also helps in achieving business objectives and goals for company. Human resource department
also make various policies related to work and business environment that can help employees to
further growth.
Sales and marketing function :
it is also an important department in the company. Marketing department also helps in
making strategies related to sales and marketing. It also helps in developing product with the
help of market research. Marketing department always focuses on customer need and customer
satisfaction. Sales and marketing strategies can increase profit of the company. Ait also helps in
achieving goals and objectives.
All of these are essential functions in a company. Every department is connected with
each other. For example human resource department helps in making company policies that
create healthy environment and strengthen organizational structure. So this function can affect
organizational objectives and structure.
Relationship between organizational function and structure :
Organizational function and organizational structure can influence each other. For
example functional structure can separate departments. Many organizations follow a functional
organizational structure with a series of order. The appropriate structure allow each worker to

focus on his specific mission. So effective structure can increase functional efficiency of a
department.
Matrix structure is somehow different from functional organizational structure. It
provides greater flexibility in organizational functions. Each worker works in a function based
department.
While business environment is the sum of all internal and external factors which supports
company to analyse risk and opportunity in it’s sector effectively.
LO3
P4 Impact of macro environment on business activities
Macro environmental factors refers as a external forces of business environment that
directly impact on company’s performance and decision-making process. There are various
external forces i.e. political situation, customer’s needs and preferences, economic situation etc.
which impacts on all retail business companies i.e. Tesco plc and Marks & Spencer’s operations
and performance as well (Aithal, 2016). Pestle analysis is one of the great examples to analyze
external environment of the business. It is a strategic planning tool that is used to evaluate
market situation so that companies can increase their business activities and gains competitive
advantage. There are various factors of pestle analysis that are described below in the context of
comparison between two companies such as Tesco and Marks & Spencer.
Political factors:
Political factor is one of the major external environment factors that impacts on
organization’s operations as well as their productivity. This factor includes various political
policies and strategies that affiliated with businesses operations, which are formulated and
imposed by UK’s government in order to keep control on business growth and country’s GDP
rate. For example, free trade regulation (FTR) policies have given effective opportunity to the
M&S and Tesco to expand it’s business around the world in respect of gain high profit margin on
products (Bashir and Verma, 2017). With this policy, companies have enabled to increase
demand of products and services among customers and fulfil their needs by providing high
standard quality products at reasonable price. Brexit is one of the major political regulation that
have led various changes like profit margin, sales revenue and productivity of the businesses i.e.
Tesco and M&S which runs their business in retail sector. Thus, Tesco and M&S have faced
heavy loss in their profitability while running their business activities in multiple countries
across the world.

Economic factors:
Brexit is the government policy that has brought slowdown in United Kingdom’s
economy such as high unemployment rate, high inflation rates, changes in disposable income of
customers and production costs. Retail organizations have faced recession period in UK that has
led to less demand of goods and services which directly affected sales revenue of business
negatively. Low pricing strategy adapts by Tesco in it’s market as resulted it has gained high
competitive advantage in it’s market. On the other hand, M&S adapts skimming and market
penetration strategy as resulted it enables to gain high profit margin by increasing purchasing
behavior of customers. Thus, both companies i.e. Tesco and M&S enables to increase customer’s
engagement for the buying purpose. But high cost production and high borrowing interest rates
Tesco and M&S finds more hardships to offer their goods and services at reasonable price. So,
company unable to maintain quality of products at lower and scheme prices which are highly
essential for attracting users.
Social factors:
UK’s public posses’ wide range of difference from each other’s in the form of culture,
beliefs and others so companies needs to identify preferences of targeted audience to gained
large market share and gains high economic profitability on selling. So, there are population
takes buying decision accordingly price and quality. So, low disposable income has played
significant role in increasing sales revenue of M&S and Tesco because these are highly
popularized for the various discounts. Organic food products also offer by both companies Tesco
and M&S and promotes their economical scale by applying different modern techniques which
have increased engagement of large-scale population to purchase goods in large quantity as well
as enhance sales. Overall, social changes have led wide profitability on companies’ volume of
sales (Cherunilam, 2016). Tesco and M&S are retail companies which offers similar products to
the customers and have strong global presence in the market as well. So, some people think that
Tesco sells high quality products while other UK’s customers thinks that M&S offers best
customer services with high quality products. Thus, both companies M&S and Tesco often
become the reason of declining sales revenue of the businesses. So, it is essential for the both
companies to differentiate it’s product and services from other brands then they enable to
generate extensive profitability in the business activities.
Technological factors

Emerging technology, changes in technology etc. are the major technological factors,
Adaption of technology changes are essential for the company in order to gain highly
competitive advantage in the business market. For example modern technologies i.e. social
media has used by M&S and Tesco for selling their products and services in order to attract large
number of people who are staying in different countries across the world (Vallati and Grassi,
2019). So, these modern technology supports companies in increasing profitability, sales and cut
cost for marketing their goods and services thus played significant role towards declining input
and maximizing output for success and growth perspective of businesses. Online home delivery
service also offers by Tesco and M&S through which they have established strong customers
base as well as increase their customers’ experience. But the negative impact of the modern
technologies is that it has influenced high cost of the companies Tesco and M&S as continuously
use innovative and effective tools in respect of meeting individual’s needs.
Environmental factors:
There are various emerging and recent factors which needs to consider by business to
grow and sustain in future competitive market situations. For example, Tesco has taken health
and safety of customer’s initiatives by introducing organic and qualitative food and non-food
items in order to fulfil preferences and needs of customers far from their desires. While M&S has
taken initiatives of optimum utilization of available in respect of receiving values-based
outcomes which can provide to consumer and reduces high amount of wastage. At the same
time, different initiatives have increased cost as companies have to invest high capital to protect
their natural resources, health and wellbeing of individuals in the job place.
Legal factors:
Wages Act, equity pay structure, health and safety Act and other legislations related with
business activities are known as legal factors which have impacted on company’s productivity,
decision-making process as well as operations (Kulshrestha and Puri, 2017). Tesco and M&S
follows various laws regarding to businesses i.e. equality, health and safety, discriminative laws
that assist company’s in order to meet needs of numerous people and given large contribution in
achieving all business objectives effectively. However, companies gets negative impact from the
legal factors such as to make their business sustainable follows all legal laws by Tesco and M&S
so it have to incur economic loss.

LO4
P5 Internal and external Analysis
Swot analysis is a strategic analytical tool that is applied to identify strength, weakness,
opportunity and threats of specific companies like Tesco and M&S plc.
Swot analysis of Tesco
 Strengths
Tesco has strong global presence in the business market that is one of the major strengths of the
company. Marketing team of the Tesco plc is quite talented and skilled as compared others and
plays significant role in maximizing productivity of the business. It has wide range of product
line that supports to attract large number of customers for buying it’s products as well as enables
to gain high competitive advantage in the UK’s retail sector (Likoko and Kini, 2017).
 Weaknesses
Upper management of Tesco plc still follows traditional business strategies and tactics in it’s
retail market. These traditional tactics is not that much effective through which company can
increase growth of business.
 Opportunities
Currently, Tesco has opportunity to expand it’s business in multiple sectors in order to establish
loyal customer base. For example, if Tesco starts to operate it’s business in technology sector
that will ultimately generate high revenue.
 Threats
Brexit has become one of the major threats for the all business sectors i.e. retail sector. National
economic crisis also has impacted on retail companies i.e. Tesco economical infrastructure.
Swot Analysis of M&S plc
 Strengths
M&S has strong free cash flows that offers resources in order to expand business projects. It has
string global presence in the retail sector through which it enables to build strong customer base.
M&S has strong brand portfolio as compared others and has achieved competitive advantage
over it.
 Weaknesses

It has poor financial performance that is one of the major weakness of the company. M&S has
strong competition from other popular retail brands i.e. Tesco, Asda etc. in respect of limited
market shares (Nazarko and et.al., 2017).
 Opportunities
It has various opportunities such as introduce new market segments that will support company to
gain more profit. Company has opportunity to expand it’s brands in emerging markets like India
and China through which it can build strong customer base as well as generate high profit margin
on it’s product portfolio.
 Threats
Government policies for retail stores and tough competition in the retail sector are the major
threats for the Marks & Spencer.
Justification
Strengths, weaknesses, opportunities and threats are the major internal business
environment factors that plays effective role in decision-making process of both companies i.e.
Tesco, M&S. There is a reason such as upper management of the both businesses such as Tesco
and M&S plc takes all decision based on market situation in respect of gaining high returns on
their investment (Phadermrod, Crowder and Wills, 2019).
P6 Strengths and Weaknesses interrelates with external macro factors
TOWS matrix
It is a strategic planning technique or tool that is used to evaluate external and internal
environment of the business. This framework is used for the Tesco plc to gain effective business
strategies by analyzing internal and external environment of the company.
Tows Matrix for Tesco External opportunities or
external environment macro
environmental factors
 Strategic alliance
with other brands
 Online shopping
 Emerging markets
 Expanding Jack’s
External threats or external
environment macro
environmental factors
 Brexit Referendum
 Competition with
supermarket giants
 Economic crisis

business
Internal strengths
 Biggest grocery
retailer in the UK
 Diversified market
and product range
 Superior technology
usage
 Effective supply chain
network
SO Strategy
(Interrelationship)
 It has strong brand
presence in UK
market so it has
opportunity to
collaborate with
other brands
effectively.
 It has diversified
product range with
products so, it has
opportunity to offer
online services to the
customer through
which it can improve
shopping experience
of customers
effectively.
 It uses superior
technologies that
will support
company to expand
it’s business in
emerging markets as
well as builds strong
customer base.
 With the support of
strong supply chain
company can
ST Strategy (Interrelationship)
 Strong brand image in
UK’s market supports
company to deal with
Brexit crisis in precise
manner.
 Diversified product and
market as well as usage
of superior technology
will help to gain high
competitive advantage
from supermarket
giants.
 Effective supply chain
and diversified product
portfolio will support to
Tesco to decline impact
of economic crisis on
business operations.

effectively it’s jack
business in multiple
countries across the
world in respect of
generating high
profit margin.
Internal weaknesses
 Decrease in operation
profits
 Low-cost strategy
 Clubcard controversy
WO Strategy
(Interrelationship)
 Strategic alliance
with strong brands
will help Tesco in
increasing operation
profit.
 Online shopping will
lead benefits over
the Low-Cost
strategy for the
Tesco.
 Expanding Jack’s
business and
business expansion
will support Tesco to
deal with Clubcard
controversy (Shtal
and et.al., 2018).
WT Strategy (Interrelationship)
 Tesco must implement
sustainable practices
that will help to deal
with Brexit referendum
as well as increase
operational profit.
 Low-cost strategy will
support Tesco to win
competition with
supermarket giants and
increase customer’s
buying behavior
(Sivarajah and et.al.,
2020).
 Tesco plc should
conduct continuous
performance
development program
for the staff that will
improve individual’s
operational
performance through
which company will
enable to better

customer’s
performance through
which company will
easily deal with
economical and
Clubcard controversies.
CONCLUSION
This report has been summarized interrelationship of different functions within company.
It has shown negative and positive impact of different macro environmental factors on the
business operations. Furthermore, the brief study has concluded pestle analysis in the context of
comparison between supermarket companies i.e. Tesco and M&S. Tows matrix framework used
for Tesco in order to understand interrelation between external and internal strengths of the
business on it’s business productivity and performance in this report.

REFERENCES
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