Regent College: Business and Business Environment Report for NatWest

This report provides a comprehensive analysis of the business environment, focusing on NatWest as a case study. It begins with an introduction to business and its environment, followed by an examination of the interrelationship between various organizational functions, such as finance, marketing, h...Read More

Business and Business
environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Covered in PPT......................................................................................................................1
P2 covered in PPT.......................................................................................................................1
TASK 2............................................................................................................................................1
P3 Relationship between various organisational function nexus with business objectives........1
TASK 3............................................................................................................................................3
P4 Impact of external environment on the business operations..................................................3
TASK 4............................................................................................................................................5
P5 Internal and external analysis of the organisation..................................................................5
P6 Interrelation of strength and weaknesses with the external factors.......................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business is an economic activity aimed at earning profits. Business is largely affected by
the environment that surrounds it. A business environment consists of elements which are
beyond the control of the company and affects its operation in huge manner. The environment
can be categorised into External and Internal environment. Change is the only constant thing in
the business environment therefore the manager have to ensure that all the operations are carried
out in a smooth manner (Aithal, 2016). NATWEST is one leading financial service provider in
the United Kingdom. The company focuses on providing the financial assistance to other
business houses so that their goals can be achieved in an effective manner. This report focuses on
thorough understanding the business environment and how it can be dealt in an effective manner.
Business plan will be designed and policies will be formulated to minimize the influence of
environment onto the operations. The interrelations between the various functional areas will be
carried out as well.
TASK 1
P1 Covered in PPT
P2 covered in PPT
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2

3

4

5

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TASK 2
P3 Relationship between various organisational function nexus with business objectives
There are a variety of functions performed in a business to achieve the specified task. The
function necessarily have to work together for successfully accomplish the objectives. The
various function performed in an organisation are operations, finance, marketing and human
resources. The communication between all the mentioned function is determined by the
organisational structure (Aterido, Hallward-Driemeier and Pagés, 2011). The interaction between
the functions is necessary to carry out its operations in the efficient and profitable manner. The
vital functions are as follows:
Finance Function
In consideration to the NatWest, finance is the most important function in the company.
The company have to ensure the timely availability of the funds to carry out the business
operations. The availability of finance is not only confined to the lending of money it also
includes the payment of salaries, bills and for the marketing and research programs. Finance is
the blood of the organisation as all the other functions are dependent upon finance.
Marketing Function
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Marketing is vital no matter which sector which sector a company is catering. Effective
marketing strategies help in development of competitive advantage for an organisation (Bryman
and Bell, 2015.). The marketing activities for NatWest are necessary to compete in the market.
This function can only be fulfilled with adequate marketing budget allocated by the finance
department. The marketing function is helpful in enhancing the sales volume of the company.
The company can make use of various marketing tool to defeat the competitors such as Barclays
and Standard chartered in terms of market share when utilised effectively. The integration
between marketing and other function can facilitate goal achievement in a shorter duration of
time.
Human Resources Function
The human resource department is one of the crucial function which aid in achievement
of goals in a rapid and cost effective manner. The marketing function assess the need of
individual in the marketing as well as in the operation department which can be fulfilled by the
HR department (Cuervo‐Cazurra, 2011). The NatWest wishes to increase its sales volume in
insurance sector. Considering this the HR department will inculcate more individuals in the sales
force and will develop a tempting reward system so that the goals will be attained in the timely
manner. The integration between various function is necessary to fulfil the human resource
requirement in every field.
Supply Chain
Supply chain is defined to be the way through which the product or services are made
available to the customer (Drucker, 2017). The determination of the supply chain involves
integration between various functions of business. The market research identified the target
market where products are to be sold. The operations help in determine the level of profitability
to be maintained and finance department allocated the budget for the same. The combination of
these function help in identification of ideal supply chain for NatWest. The business objectives
can be achieved by effective marketing and supply chain strategy.
Operation function
The NatWest carries its operations in the banking and insurance areas. The operations
function determines the loans and finance to be allocated to a company. It does require to check
the background and the track record of the party to ensure whether to provide financial assistance
or not. The marketing department determines the pricing policy and interest rates to be charged
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so to compete with the rivals in an effective manner (Hamilton and Webster, 2015). The
amalgamation between the operations and other functions make sure that goals are attained
within the specified time.
TASK 3
P4 Impact of external environment on the business operations
The external environment carries a significant impact on the functioning of business
operations. These external factors are beyond the control of the organisation. Therefore it is
necessary to evaluate the factors of the external environment so that policies and decisions could
be framed to minimize the effect on the business plans. NatWest is influenced by a large extent
due to components of the external environment. The management preferred PESTEL to develop
a thorough understanding of the factors and means can be developed to counter the effect of the
same. PESTEL is one of the most common assessment tool used to study the external
environment. It takes into consideration the political, economical, social, technological,
environmental and legal (Welford, 2013). The PESTEL of the NatWest is as follows:
Political Factor: The political factors takes into account laws and policies formulated by
the government. The prices of goods and services are determined by the taking into account the
political factors. The banking sector experiences continuous interference from the government.
The rate of interest and the credit reserve ratios are determined by the government which affect
the business of the bank. The country opting out of the European union will experience new
policies and laws by the centre government. The recent increase in the surcharge to 8% depleted
the level of profitability of the company.
Economical factor: The circumstances in the market and the banking industry share a
very close relation. The situation of recession in the economy affects the accessibility of the
capital by the banks. The value of the currency help in capital management. The situation of
inflation in the economy is a major drawback for the banking institution as such circumstances
arises due to decrease in the value of the currency (Wheelen and Hunger, 2011). Fall in the value
of the currency makes the international investors a little hesitant. The recent Brexit forced the
government to lower the rate of interest which hampers the profitability of the financial
institution.
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Social Factor: The social factors such as culture, buying behaviour and level of income
determine the perception towards the banking. The company carries out its operations in the
United Kingdom exclusively. The average age in the country is above 40 which can be seen as a
opportunity for growth as elder people need more financial assistance. The saving of elderly
people can be deposited with the bank and can be effectively utilised. The ease in the banking
will really change the perception of the people with the banking system and therefore will turn
up to bank for the financial needs.
Illustration 1: Factors of external
environment
(Source: Factors of external environment, 2015)
Technological Factor: The incorporation of the internet in the lives of the people have
really turn out to be more profitable for the company (Wild, Wild and Han, 2014). Along with
the profitability the banking application supplies a customer with a seamless experience. There
have been a upside down change in the way people handle their bank accounts. NatWest has
invested a large sum of amount in the digitalisation and development of mobile banking
application as to differentiate the offerings from the competition. The another side to this
development is the increase in the number of online frauds and online risk of doing a transaction.
Legal Factors: NatWest have to adhere to the laws of the account holders in terms of
privacy and laws concerning trade. The company is involved in 15 mortgage lawsuits in the
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United States. The Royal bank of Scotland the parent organisation of NatWest have some
settlement issues with the department of justice (DOJ) and owes some huge penalty related to
mortgages.
Environmental Factors: The NatWest have always been concerned about the
environment and supports sustainable development. The introduction of technology have led to
paperless transaction in the banking sector. The company is focused to develop resource efficient
future. There is a significant reduction in the emission of the green house gases by the company.
Company is focused to buy renewable source of energy which can be replenished with the
minimal efforts.
The above analysis of the external environment helps in formulating the policies and
decisions so that the business can achieve a certain level of profitability (Williams and Naumann,
2011). The management is responsible to conduct the analysis on the regular basis to find out the
factors which affect the business operations in an constructive and destructive manner. The
analysis done can assist in looking for effective ways to counter the problems which may arise
due to the external environment.
TASK 4
P5 Internal and external analysis of the organisation
It is necessary for a business to critically analyse the internal and external factors which
influence the functioning of the business. The internal analysis of a business is done through
SWOT tool. It is one of the most common analysis used by the corporation to identify the
strength and weaknesses of a company (Zott, Amit and Massa, 2011). The NatWest conducted
swot analysis to formulate an action plan for the future. The elements of SWOT are as follows:
Strength
Strength of a company is defined as the areas in which the company is excelling and able
to perform as per the expectations of the management. These positive attributes help a company
in accomplishing targets in effective manner. These factors help in formulating plans for the
future. The strength of NatWest are as follows:
1. Vast distribution Network of the company help in adequate distribution of the services in
the target market.
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2. The capable human resources are another positive attribute of the company. NatWest
focuses on developing and training its human resources so that a company can obtain
competitive edge.
3. Relationship handling and customer management are the strength of the business. The
happy clientele promotes positive word of mouth and target attainment in an effortless
manner.
4. The positioning of the banks at the prime location help in better visibility. The
availability of the banks at all the leading positions help in sustaining competitive
advantage.
The above mentioned strength of the company can be utilised further to achieve the goals
and objectives. The objectives of increase in sales volume of insurance by 20% can be achieved
by utilising company's vast distribution of the company.
Weaknesses
Weaknesses are the non performing areas of business and which carries a scope of
improvement (Business environment, 2017). These areas need to be improved in order to
improve the performance of the company. These are the components which cause hindrances in
objective achievement. The weakness of NatWest are as follows:
1. One of the biggest weakness of NatWest is that the operations are confined to United
Kingdom and there is less global incursion.
2. There have been controversies surrounding the internal audit of the company which
hampered the brand image of the company.
3. The profitability of the company have been another weakness of the company. According
to the reports published it was stated that company have incurred losses of 7 billion euros.
These above mentioned are the weaknesses of the company which is to be enhance in
order to achieve the objectives of the company.
Opportunities
Opportunities are the chances to the business to enhance their scope. The chances that a
company gets help in achieving competitive advantage. The opportunities for NatWest in the
current market are as follows:
1. Innovation on the digital platforms is one of the biggest opportunities a company have
which can help in differentiating its product among its rivals.
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2. The development of the latest taxation policy brought new opportunities for the NatWest.
The relaxation in taxation policies carries a positive impact on the functioning of
business. The company can exploit this opportunity for company gains.
3. The low inflation in the market appreciates the currency of a country which aid in raising
the capital in an easier manner.
4. The buying habit of the people in the country help in increasing the scope of operation in
the United Kingdom.
5. Expansion of business outside the host nation.
The above mentioned opportunities are the chances that exist in the market when availed
the company which enhance the scope of operations. The company can expand its operations in
the international markets. The favourable taxation policy can be exploited so as to achieve new
level of profitability.
Threats
Threats are the factors which can cause potential loss or danger to the company. NatWest
is largely dependent upon the factors in the external environment which can be unfavourable to
the operations of the company. The major threats of NatWest are:
1. The exit of United Kingdom from the European union is a major threat for the business.
The company should formulate contingency plans to minimize the effect on the same.
2. The legal lawsuits of the company in front of the Department of Justice (DOJ).
3. The increase in the surcharge will carry a negative impact on the profits of the company.
4. The continuous change in the regulatory policies become threat for the company.
The above mentioned are the threats to a company. After careful analysis of the threats an
organisation should construct plans to counter their effects on the company. Reduction in the
profitability can be countered by increasing the profit margin.
P6 Interrelation of strength and weaknesses with the external factors
The strength and weaknesses are interrelated with the external factors of the environment.
These factors can be influenced with the change in the macro environment of the company. The
macro environment carries a impact on the business in the long run of the business. The
combination of all the factors help in deriving out the plans and policies of the future (PESTLE
Analysis for the Banking Industry, 2017). Management have to critically analyse the external as
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well as the internal environment of the company so that business plans for the future can be
planned.
Strength: These are the positive attributes which support the organisation in
accomplishing its objectives. The strength of the company are its vast distribution network. The
competitive rates of interest set by the company helps in increasing the sales volume as well as
retaining the potential customers. The external factors which are related to the company's
strength are:
Political: the changes in the policies and laws of the government regarding the taxation
policies have turned out to be a strength of a business. The company formulated its plans for the
future on the basis of laws and taxation policies existing in the market. The credit reserve ration
and the liquidity ratio determine the scale of operation and the liquid cash which is to be kept
with the firm.
Economical: The banking business is largely dependent upon the situation in the market.
The market recession has caused a slow down in the banking field as well. The government and
organisation formulate policies to get make the best out of the situation.
Social factors: the social factors takes into consideration the demographics, likes and
dislikes of the people. The average age is above 40. which is a strength for the company as the
ageing people have more disposable income and avail various pension plans which is beneficial
for the business.
Weaknesses: These are the non performing components of business. Which are to be
improved to gain operation efficiency. The NatWest weaknesses are decreasing profitability of
company and the scale of operations. The external factors to be taken into consideration to
overcome the weaknesses.
Technology: there is an need of refinement in the online and application portal. There is
need to be updated in terms of technology so to overcome the deficiencies of the business.
Legal Factors: The another major weakness of the company is the legal lawsuit the
company have been involved with the department of justice over mortgage. The company have
till date paid 3.7 billion euros to settle the lawsuit. The company is involved in around 15
different legal lawsuits which hamper the working of the company and needs to be resolved to
achieve better operations.
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CONCLUSION
From the above report it is examined that there is constant changes in business
environment thus firms had to adopt plans and policies so they can easily implement these
changes without facing any type of difficulty. Each business which are executing their operations
in economy are having different size and scope thus they have banks have to analyse all these
factors and then they should make plans in order to give loans to customers who want to start
their business operations. There are internal and external which are affecting business thus plans
had to be made in order to resolve them in effective ways so they will not affect activities of
business. PESTLE analysis is done in order to maintain relationship among all those factors
which are valuable for business and which helps them to grow and achieve success in their
overall business operations.
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REFERENCES
Books and Journal
Aithal, P. S., 2016. Study on ABCD analysis technique for business models, business strategies,
operating concepts & business systems. Browser Download This Paper.
Aterido, R., Hallward-Driemeier, M. and Pagés, C., 2011. Big constraints to small firms’
growth? Business environment and employment growth across firms. Economic
Development and Cultural Change. 59(3). pp.609-647.
Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press, USA.
Cuervo‐Cazurra, A., 2011. Global strategy and global business environment: the direct and
indirect influences of the home country on a firm's global strategy. Global Strategy
Journal. 1(3‐4). pp.382-386.
Drucker, P. F., 2017. The Theory of the Business (Harvard Business Review Classics). Harvard
Business Press.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Welford, R., 2013. Hijacking environmentalism: Corporate responses to sustainable
development. Routledge.
Wheelen, T. L. and Hunger, J. D., 2011. Concepts in strategic management and business policy.
Pearson Education India.
Wild, J. J., Wild, K. L. and Han, J. C., 2014. International business. Pearson Education Limited.
Williams, P. and Naumann, E., 2011. Customer satisfaction and business performance: a firm-
level analysis. Journal of services marketing. 25(1). pp.20-32.
Zott, C., Amit, R. and Massa, L., 2011. The business model: recent developments and future
research. Journal of management. 37(4). pp.1019-1042.
Online
PESTLE Analysis for the Banking Industry. 2017. [online]. Available through:
<http://pestleanalysis.com/pestle-analysis-for-banking-industry/>.
Business environment. 2017. [Online]. Available through:
<http://www.investorwords.com/19252/business_environment.html
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