Business Environment Analysis: Types of Organizations and Functions

This report provides an analysis of different types of organizations, including public, private, and voluntary sectors, along with their respective scopes and sizes. It explores the functions within an organization and how they relate to organizational structure, using IKEA as a case study. The report also delves into the business environment, utilizing SWOT and PESTLE analyses to assess the internal strengths and weaknesses of specific businesses in relation to external macro factors. The study covers the organizational structure, functions, and interrelationships within a business, emphasizing communication and resource utilization for improved profitability and brand promotion. The report also presents insights into the mission, vision, and operations of the American Red Cross and Action on Rights for Children (ARCH), highlighting their roles and functions in society.

Division of Business
Business and Business Environment
Learning Outcomes: LO1 Explain the
different types, size and scope of
organisations. LO2 Demonstrate the
interrelationship of the various functions
within an organisation and how they link to
organisational structure. LO3 Use
contemporary examples to demonstrate both
the positive and negative influence/impact the
macro environment has on business
operations. LO4 Determine the internal
strengths and weaknesses of specific
businesses and explain their interrelationship
with external macro factors.
Comments
Assessor’s Signature:______________
Referred
Date:______________
Late: Yes No Internal Verification: Yes No
I declare that the work I am submitting for assessment contains no sections in copied in whole or part
from any other source, unless it is explicitly identified by means of quotation mark or by means of wholly
indented paragraphs. I declare that I have also acknowledged such quotations by providing detailed references
in an approved format. I understand that unidentified and un-referenced copying both constitutes plagiarism
which is an offence. I give my consent for my work being scanned by Turnitin formatively and summatively for
the purposes of assessment.
P1 P2 P3 P4 P5 P6 P7 M1 M2 M3 M4
D1 D2

Introduction
In the business, activities and performance are determined by the internal and external
environment. Combination of internal and external environment forms the business environment.
The factors included in the external environment includes political, economic, social and
technological factors. The factors included in the internal environment are employees, owners,
stakeholders and customers. In the first part of this assignment three different type of
organization have identified along with their scope and size. The second part of the assignment
focuses on assessing the business environment in which the company operates using different
models like SWOT and Pestle.
Task 1
P1 Explaining three different types and purposes of organizations.
An organization can be defined as the device used by people to facilitate and perform objectives
to achieve objectives. There are different types of organizations with different purposes. Some
types of business organizations have been listed below:
TYPE OF ORGANIZATION
 Public Sector: Government own the public organization and they are operated by the
government employees. The main purpose of these organizations is to provide services to
the citizens of the state. Public organizations are of two type one which are completely
owned by the government and second is partly owned by government which holds above
half of the capital share of the company. The privet organizations which are completely
owned by government are funded by the tax collected by the government. The purpose of
public company is not to earn profits instead focus on serving citizens. Example of Public
Sector Company is postal service (Ďaďo, Wiktor and Źbikowska, 2015)
 Size and scope of public sector: IKEA is global retailer organization that presently has
its operation and existence in many countries. It currently has 800 retail store across the
countries. Company has wide scope in retail sector due to continuous application of new
product development strategy. Large size multinational enterprise that consist of high

business operations and revenue of around 115.7 million per year and employee more
than 30000 workers.
 Private Sector: Privet organizations are managed and operated by individuals or privet
authorities. The main aim of this privet sector organization profit maximization and
developing positive reputation. Private sectors of free market economy have highly
competitive business environment hence they provide quality service to survive. These
organizations also comply with the government rules and regulations.
 Size and scope: With the continuous growth in economy, B&M has also achieved a
sustainable growth and expanded their business at international level. They presently
operate in countries like UK, Scotland and Wales with 500 retail stores. The main scope
of these firms is to expand their business in retail market and increase their profits
through expansion of business in other countries.
 Voluntary Sector: The organizations within this sector provides voluntary services to
the communities. They fulfill a certain objective in the society and are in nature they are
non-profitable. The uphold the social and moral values. Voluntary organizations can
carry out right movements and social welfare campaigns (Hollensen, 2012)
 Size and scope: There is wide scope of American red cross and actions of rights for
children as they are major association as they work for resolution of social problems and
helping the people.
Legal structure of the business organization
 Sole trade: it is the business owned by a single individual, the business is easy to setup as
it does not require complex paper work. According to law the owner and the business are
the same. Sole trader does not have limited liability hence they are not responsible for
debts.

 Partnership: a partnership deed is set up in this form of business structure. The deed
defined the legal relationship among the partners for example how profits and loss will be
shared, and responsibilities of the partner.
 Companies: by law companies are separate form the owners. There are various
companies Act defining the ways in which company must carry out their business.
P2 Explanation the size and scope of the organization
IKEA
IKEA is a leading multinational organization operating in furniture industry since 1943. It
designs, manufactures and sells ready to assemble furniture in many nations. Headquarter of the
company is in Delft Netherland. Ingvar Kampard is the founder of the company. Ikea is famous
for its modern designs if furniture and appliances. The design of Ikea stores is usually thought to
be with eco-friendly. Ikeas ability to control the cost of operation allows it to charge low price
for the products and services offered to the customer (Inter IKEA Systems B.V., 2017)
Products and Services
 Furniture
Most of the furniture designed and sold by Ikea are ready to assemble. Using ready to assemble
design helps the company in reducing the cost as the can ship large volume of products in single
cargo. For instance, space required to ship an assembled bookcase is more than the space needed
to ship ready to assemble book case.
 Houses and flats
Ikea has also introduced flat-pack house and apartments in it product portfolio. The aim is to
reduce the price for the customer purchasing home for first time. In 1996 this product of Ikea
was launched in Sweden by the name of Boklok (IKEA, 2016).
Mission and Vision
 IKEA’s mission statement:

The mission of the company is to products that can improve the everyday life of many
individuals. This mission is supported by the business idea by providing a broad range of well-
designed, modern and functional home furniture at the lowest possible price so that more and
more people can buy them.
 IKEA’s vision Statement
The vision of Ikea is to provide easy access to customers so that many people can get a better
everyday life. Most of the profit is reinvested in the Ikea stores, new product development and
improving the operation so that it can constantly offer low price to the customer (IKEA, 2017)
AMERICAN RED CROSS.
It is a philanthropic organization that offers helps to the people in a crisis, calamites, alleviation
in the country.
Administrations PROVIDED BY ARC.
Disaster Relief: In disaster the company provides, protection, food along with emotional and
wellbeing management to assist the families to recover from the disaster.
Supporting America's Military Families: the families, military individuals and veteran are
prepared so that they can adapt and react to the difficulties of military.
Lifesaving Blood: more than 40% of the blood supply in America comes for Red cross and
nearly 4 million people donate blood each year.
Health and Safety Services: The offer many courses for wellbeing and security of the citizens of
the country.
Mission
The mission of the company is to reduce the human suffering in crises by arranging a volunteers
force and liberty of benefactors.
Vision

The vision of Red cross is to transform empathy without any hesitation to that their teams are
always ready and prepared to face calamities (Keegan and Green, 2016)
Action on Rights for Children (ARCH)
It is a voluntary organization working for children. It is an internet based company found by
families, academics and lawyers in 2001. The main purpose of formation of this company was
concern related to the civil liberties of children.
The mission of the company is to make certain that all the children have a healthy, fair and safe
start in their life and successfully enter their adulthood stage by the help and assistance of caring
community and family.
The company operates at national level and serves the children at community, states and federal
level. At ARCH more attention is paid to the needs of poor children and children with disability
(Czinkota and Ronkainen, 201tion0)
Task 2:
P 3. Explain the relationship of different organizational functions and how they link to the
structure of organization:
IKEA is a global company of furniture retails that is located in Sweden. In many parts of the
world the company has operations on large scale. In order to satisfy the customers, the company
is emphasizing on the best quality and value of the products to customers and could earn high
amount of profitability. The hierarchical structure is used by the company and in this structure
the operations of the company is segmented in various levels that are supervised by different
level of managers. Different roles and responsibilities should be given to different level of
managers and between them the work is assigned for efficient and better completion of
operations. The employees of lower level are required to accomplish the task assigned to them
and then report back to the upper level of management while the upper level of management is
required to keep control on the employees to which task is delegated and guide them (Czinkota
and Ronkainen, 2010)

In order to attain the objectives within a set time period the IKEA management has set its
objectives so that they should be attained on time. To provide the products to the customers that
meet their requirements and demands is the main aim of IKEA and to generate the loyalty in the
customers the company is focusing on the production of products that deliver value for money.
By dividing the main activities into many sub operations such as Labor, availability of raw
materials, allocation, and selling of the products such as home appliances and furniture’s and it
should be managed effectively by the IKEA managers. By providing training to the employees
efficiently for the operations the operations should be managed effectively and by elaborating the
different strategies for training which involves the distribution of workload, progression of
teamwork, employees should be given motivation in order to get better performance from them
(Keegan and Green, 2016)
The operations of IKEA are spread between various countries and are not limited to one country
and IKEA follow different culture and management styles of country in which it operates in
order to manage the operations in different countries. The culture of the country in which the
company operates should be followed by IKEA in order to attach with the customers with ease
and they feel comfortable for brand. Among different functional departments and different
companies and different customers the company should establish a proper channel of
communication. The profitability of the company should be improved by establishment of a

proper communication channel and it may also assist in brand promotion. No matter where the
company performs some of the standards that are prepared by the company should be adopted
which also involves the products quality preservation (Czinkota and Ronkainen, 2010)
The link among different functions of the company should be established with help of
communication and it also assist in endorsing the information flow from one department to the
other and it may flatten the procedure and as a result the resources should be utilized in a better
way.
Interrelationship among different organizational functions:
There are different structures that an organization like IKEA could use such as:
 Functional structure:
On the management relationship between a superior and subordinate IKEA works clearly. The
roles and responsibilities of different employees working in different departments for separate
units should be clarified by this structure. In this structure an employee has a clear mind of his
authority and responsibility of work, it also assists the employees to emphasize on their
particular job (Uche, 2016)
 Matrix structure:
Merits: There is s great level of flexibility in working via functional business by using this
structure and in a large company like IKEA that operates throughout the world; it is difficult to
manage their operations under a common floor. Each employee work under separate function
based department such as marketing, designing etc. in this type of business structure. In order to
attain the goal of the business the employees should be assigned to different projects and
different bosses. Due to decentralized decision making this structure further assist in flexible
utilization of resources.
Demerits: For the similar function working under different department’s authority and chain of
command is difficult and it increases the cost of administrations and gives rise to high conflicts
which is another most important aspect to consider. Moreover, due to its cloudy information
there may be confusion on authority and relationship with subordinates (Uche, 2016)

 Divisional structure:
Merits: each product line has its separate divisions such as research and development,
marketing, sales. Accounting and auditing, as the IKEA has different product lines in furniture
specifically it operates in separate divisions for its different lines of products. The department
should be formed on different basis such as product, functions, jobs, projects, place etc.
Demerits: For different product lines different employees working the similar task that improves
the joblessness of work.
 Hybrid Organizational structure:
Merits: The hybrid structure assist in synchronization of configuration of divisional and
corporate objectives having greater flexibility in making of decisions with larger expertise and
effectiveness that may assist in attainment of the ultimate objectives of the company.
Demerits: There is very slow response to unexpected conditions so, there may be the possibility
of disputes that further increase the cost of administration (Yip and Hult, 2012).
Scenario 2
Task 1
P4
The acronym PESTLE is abbreviation of political, social, technological, economic, legal and
environmental factors. This analysis assists in the development and expansion of a company and
working of future projects.
Political Factors: The issues that should be handled on under it are policies of taxation, rules
and regulations, restrictions on business etc as it is one of the major factors of macroeconomic.
As it may affect the going concern of the company it is the major factor to be dealt with. For any
company the stability in political environment is important and in the context of IKEA the
political issues are favorable and stable. It has deepened its roots both socially and politically in
the major parts of the Europe and America and in addition, in African countries that are not
politically stable IKEA should not operate their as it also does not manage the political

requirements and standards of IKEA. In fact, companies that is most politically stable in the
region of its operation as is an example for other companies (IKEA, 2017)
Similarly, political factors also impact Action on right Children ( ARCH ). Any changes in the
government laws and policies impact the operations of the ARCH.
Economic factors: As these factors are varied from country to country as it economy depends
on the wage rate, rate of lending, growth and inflation rates of a specific nation or economy.
Many times, there are inclinations which affect the MNC on large part like global economic
recession which affect the global market which affect the world economies major parts. With
hedging and diversifying the portfolios such issues should be resolved. In America and Europe
other businesses like IKEA are usually impacted by worldwide recession but to avail the stable
returns in the near future investments should be made in the markets of India and China (Schilke,
Reimann and Thomas, 2009).
As ARCH is a voluntary organization that offers services to for improving the society and their
focus is not on generating profits the economic factor can impact the working of the company.
Increase of inflation will decline the funds that company gets to support its operations.
Social Factors: It is the responsibility of the company to return favorably to the society as the
company has earned a lot from the society, and this concept is known as Corporate Social
responsibility.
The good quality products should be provided to the customers apart from this by use of blond
colored woods, natural textiles and untreated surfaces.
ARCH can also be influenced by the social factor. One of the factor that positively impact the
company is increasing awareness of people on children rights.
Technological factors: IKEA has the best updated technology and is most technology savvy
that are utilized on the industry benchmarks. For change in any industry technology is the major
trigger. From the regular old or traditional market, market has switched itself to online platform.
E-commerce has been developed and has an important role in the success of a company. With
major services of selling and display of different products IKEA has up to date technology and
established website on its online catalogue. For regular updates there is a continuous backup IT

team working 24 hours. It has a huge platform for supply chain relationship apart from the
backup of IT, there are also threats come from hackers as the technology advances. There is a
security team for IKEA online platform, in order to cope up with the situation and to avoid the
vulnerability of threats (Ryans, Griffith and Steven White, 2003)
Environmental Factors:
The raw materials and other inputs that the company buy from nature or reclassified from natural
objects come under the environmental factors. On environmental sustention the company should
concentrate as IKEA is required to emphasize on better utilization of the materials purchase such
as paint fabrics, woods and energy in effective an efficient way.
Legal Factors: As the multinational companies operate worldwide as they have make coalition
with different regulations of various nations in which they operate. IKEA has to follow different
laws of land similar to MNC. Where the conditions are insignificant to follow laws and
regulations of a country IKEA do not operate under the conditions like this such as various
African nations because there is always susceptibility of legal issues (Pratap, 2017)
P5. SWOT Analysis:
For accumulating the strategic position of a company an analysis of the strengths, weakness,
opportunities and threats should be carry out. In this analysis the strength and weakness are the
internal factors that emphasize on the company and aim to deal with the extrinsic influencing
factors such as opportunities and threats. Where the business carry out its operations are the
external environment of a business.
Strengths: It emphasize on the current reputation of brand, potential customers of the company,
place in the market and working consistently on it in order to improve the share of the market,
current plan of development, effecting research and improved the satisfaction of employees and
their morale.
IKEA has its own designing and research team as far as IKEA is concerned which structure its
own products such as furniture’s that may give IKEA competitive benefit and also offers
different pioneering products to its consumers. The morale of the employees should be increased
by giving the services of cafeteria and other perks and free allowances. It may also increase the

level of satisfaction of employees and ultimately improved the profits of the company. IKEA
have a quality delivery and logistics system and have an efficient supply chain management
which may reduce the cost of labors as a consequence (SWOT Analysis, 2017).
Considering the strength of ARCH one of the main strength is that it is a internet based
organization which helps the children rights. People are now using internet facilities to get
information about companies. This helps ARCH in attracting more attention of people towards
they company.
Weakness: For every one the standards products are similar such as for every type of market
same kinds of products and services are provided as IKEA is emphasizing more on the quantity
of sale and then quality of sales.
Company has been criticized many times as far as IKEA is concerned for charge at opening of
stores, entrancing the officials of government, controversy of promotion. In southern China the
tombs have been damaged while constructing the stores of the company, sometime trivial task
for IKEA is coordination with the department of logistics as the company has outsourced major
operation of the company. The customer’s base and reputation of IKEA is largely affected by
outsourcing (Ryans, Griffith and Steven White, 2003)
Opportunity: The opportunities are the advantages or benefits in the current environment of the
company that assist in the development and growth of the company and could be a driver for
positive change to the core growth to the structure of the company as expansion in to developing
economies and emerging markets and working in ethical emerging technologies market. IKEA is
a company that mitigates the risk and reduces the chances of risk by using its strengths.
It is important for IKEA that according to the conditions of the market they are require thriving
in the emerging market of e-commerce and developing its abilities. In the countries like China
and India having large rate of growth should be noticed by IKEA for its expansion plan (Ryans,
Griffith and Steven White, 2003).
ARCH can expand further is different markets internationally to support their mission of
providing the children rights.