Business and the Business Environment: A Comprehensive Overview

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BUSINESS AND THE BUSINESS
ENVIRONMENT
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Contents
INTRODUCTION............................................................................................................................. 3
LO1 EXPLAIN THE DIFFERENT TYPES OF ORGANIZATIONS, INCLUDING THEIR SIZE AND SCOPE....3
DIFFERENT TYPES AND PURPOSES OF ORGANIZATIONS............................................................3
SIZE AND SCOPE OF DIFFERENT TYPES OF ORGANIZATIONS.....................................................5
LINK OF THE BUSINESS OBJECTIVES AND PRODUCTS AND SERVICES OFFERED BY THEM.........6
LO2 DEMONSTRATE THE INTERRELATIONSHIP OF THE VARIOUS FUNCTIONS WITHIN AN
ORGANISATION AND HOW THEY LINK TO ORGANIZATIONAL STRUCTURE....................................8
RELATIONSHIP BETWEEN DIFFERENT ORGANIZATIONAL FUNCTIONS AND THEIR LINK TO
ORGANIZATIONAL OBJECTIVES AND STRUCTURES....................................................................8
ADVANTAGES AND DISADVANTAGES OF INTERRELATIONSHIP BETWEEN ORGANIZATIONAL
FUNCTIONS AND THEIR IMPACT ON ORGANIZATIONAL STRUCTURE......................................11
CONCLUSION............................................................................................................................... 13
REFERENCES.................................................................................................................................14
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INTRODUCTION
The term business means the activities of the organization to produce and sold the goods and
services intending to earn maximum profit. The business organization can be divided into
several categories such as sole proprietors, partnership, company, etc. and their primary aim is
to fulfill the needs of the local or international customers in exchange of earning the profit.
Some of these organizations perform the activities for doing social work or some organization
aims to earn the profit. The business environment is divided into two categories one is the
internal environment and second is the external environment (Pereira, 2018). In the same way,
Tesco is a multinational company dealing the grocery and merchandising goods. The company is
engaged in the retail sector and selling the goods to satisfy the needs of the local as well as
international customers. The main stakeholders of the company are customers, government,
employees, suppliers, distributors and all the parties which directly or indirectly contribute to
the success of the organization.
TASK 1
DIFFERENT TYPES AND PURPOSES OF ORGANIZATIONS
The business organizations are mainly divided into three categories which are as follows:
Public organization
Public organizations mean the organizations which are a part of the public sector and their main
purpose is to serve the society without earning the profit from society. A public organization is
controlled and governed by the government and undertakes public issues such as voting,
debate, protest, infrastructure facilities, etc. (Nuottila et al., 2016).
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The public organizations are legally bounded as per the rules and regulations of the state and
central government. All the activities are under the rules decided by the government.
Private organization
A private organization is one whose primary objective is to earn profit in exchange for goods
and services. The business owner searches for different sources to increase their profitability
and takes the risk by investing a huge amount in new ventures. These organizations come
under the private sector of the state economy. The owner of the company either spends the
whole amount on its stakeholders or uses those funds in expanding the business operations
(Huma et al., 2017).
The rules and regulations for the private organizations are decided by the laws of the company
which is defined in the act and the act of all countries differs from each other.
Voluntary organization
The voluntary organization is usually used interchangeably with nonprofit organizations. These
organizations are included in the third sector of the economy which is neither controlled by the
government nor by the individual. The voluntary organization is owned and controlled by the
group or society and their main purpose is not to earn profit but to work for the welfare of the
society.
These organizations are a traditional form of doing business where they do not follow any legal
structure. In addition to this, there are several voluntary organizations which operate at the
national and international level and these organizations require proper legal structure and
regulations (Booth, 2018). The legal structure of the voluntary organization is divided into three
categories and these are as follows:
Unincorporated association
This structure is suitable for the small organization where the numbers of members are very
less and also they do not employ the people for its operations. This does not have a separate
legal entity and they are known by their purpose and identity of individuals.
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A trust
Three parties are involved in the trust i.e. donors, trustee, and beneficiaries. The trust clearly
defines the objective and all activities are aimed to achieve that objective. The donors are
individuals or groups which donate money, trustees are the nominal owners of the trust and
beneficiaries are the people who will get advantage from the trust.
Limited companies
The preference of most of the companies is to adopt company structure. In this structure, the
company has to arrange and manage the staff members and other resources. Limited
companies mean that voluntary organization has separate and distinct entity from its owners
(Fallan et al., 2018).
Purpose of organizations
The business objective of the private organization is to become financially strong from the
purchasing and selling of goods and services. Their business activities mainly include purchasing
the raw material and then converting it into finished and semi-finished goods and then finally
sell the final product to the consumers. On the contrary, the business objective of the public
organization is to provide quality goods and services to the people and to earn minimum profit
for business operations. And the last, the business objective of the voluntary organization is to
offer services to the people. The funds for the business operations are raised from the
donations or gifts by the individuals (Geok, 2017).
SIZE AND SCOPE OF DIFFERENT TYPES OF ORGANIZATIONS
The concept, size, and scope of public, private and voluntary organizations are shown in the
following table:
Basis Public organizations Private organizations Voluntary organizations
Meaning It is an organization which
provides services to the
people without aiming to
Private organization
satisfy the needs of the
people by
Voluntary organizations
work independently from
the government and even
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gain financial benefits manufacturing goods
and services according
to their needs
they get funds from the
government and other
people for its operations.
Size Minimum 10 people
required
Minimum 1 individual is
required
At least 2 members or
trustee and there is no
maximum limit. Also, the
size of voluntary
organizations depends on
their level of operations
Scope The scope of the public
organization is only
limited to a particular
area where it is listed.
The scope of the private
organization is not
defined and it can
operate where it wants
to.
The scope of the
voluntary organization is
only limited to their
particular locality.
LINK OF THE BUSINESS OBJECTIVES AND PRODUCTS AND SERVICES OFFERED
BY THEM
Private organizations
The purpose of the private organization is to increase the revenue and profitability of the
organization. In order to achieve this objective, there is no limit for a private organization. The
companies can expand its operations in the international market as well it has sufficient
resources. The legal structure differs from company to company but the company’s objective
must be achieved. These organizations manufacture the goods and services to satisfy the needs
and demands of the target customers (Grayson and Hodges, 2017).
Public organizations
The business objective of the public organization is to serve society and earn minimum profits
for business operations. The products or services offered by the public organizations are a
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railway, infrastructure, education, training and many more. They charge a minimum amount
from the people in the way of tickets, etc. so that they can easily operate.
Voluntary organizations
The primary business objective of the voluntary organization is to work for the welfare of the
particular society and this is the reason why the operations of the voluntary organization are
limited to a particular locality. Voluntary organization requires at least 2 members and
maximum there is no limit which is based on the purpose and the number of the people it
wants to cover with these organizations (Tukker and Tischner, 2017).
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RELATIONSHIP BETWEEN DIFFERENT ORGANIZATIONAL FUNCTIONS AND
THEIR LINK TO ORGANIZATIONAL OBJECTIVES AND STRUCTURES
Relationship between different organizational functions
Organizational functions are the set of activities which are carried out internally to achieve the
overall objective of the company. The organizational function of the Tesco includes the
following departments:
 Production function
The production function of the Tesco is a combination of various factors such as labor, capital,
raw material as well as information. The demand for labor or human resources are fulfilled
from the HR function, the requirement of capital is fulfilled from finance function as well as
information is collected from the marketing and R&D function of the Tesco.
 Sales and marketing function
Sales and marketing function is the most important function for the Tesco because it helps to
fill the gap between the customers and the company. The success of the Tesco depends on the
satisfaction of the customers as well as other stakeholders of the company. The marketing
department of the company collects the information from the market and then uses it to grab
the opportunities for growth and expansion of business (Bonev and Cavalli, 2016). The
marketing function of the Tesco includes following activities like distribution, sales, advertising,
promotion, supply chain management, logistics and many more.
 Finance function
The finance function is related to usage and expenditure of the financial funds which is required
for different business operations such as promotion, HR department, production, R&D and
many more. This function provides details about financial performance and its position in the
industry. The financial department prepares the budget for every department, allocate the
resources and then measure the performance against the determined budget. The financial
department of the Tesco ensures that there must be sufficient availability of the cash in the
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organization so that all other operations should be carried out efficiently. In addition to this,
Tesco also hires the internal auditors to calculate the performance of each department and
then to take the required actions for improving the situation if required.
 Human resource function
The main purpose of the human resource department is to look after each activity of the
employees. The objective of the company can be achieved through coordinated efforts of
employees from all departments. The HR department of the Tesco develops strategies and
plans to increase the efficiency and overall performance of employees. The activities included in
the HR department of the Tesco are recruitment, training and development, compensation,
job-design and many more. The company is abided by the rules and regulations of countries in
which it operates (Thompson, 2017).
 Research and development function
The main role of the R&D function is to improve the existing product and to introduce a new
product as per the needs and demands of the customers. The R&D department is used for
improving the production process, operations as well as products and services. The R&D
function helps the company to reduce the operation cost, maximize the profitability and to stay
ahead in the competition (Qrunig and Qrunig, 2016).
The link between organization functions and objective and structure of the company
These functions help the organization to achieve the objectives on time. The relationship
between the organization functions and the objective can be explained by taking an example.
For instance, the objective of the company is to increase the sales of organic products by 5%
within the time frame of 2 years. In order to achieve this objective, all the departments must
work in coordination. At the initial stage, the R&D function will assess the country where the
requirement of organic products is high. The finance department allocates the funds to HR,
production, marketing, and all other departments. The production department starts
manufacturing organic products according to information collected from the R&D department.
The manufactured product is then ready to be marketed and sold. The marketing department
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advertises the product and distributes the goods at the place where it is required and gives
collected funds to the finance department. The cycle is completed in this manner and all
departments coordinate each other in achieving their goals.
In addition to this, each function is divided into a specific structure where different hierarchies
are defined to help the team members. The organization structure found in different
departments of Tesco is hierarchal, functional, divisional as well as a matrix structure.
Figure 1: Relationship of organizational functions and organizational structure
[Source: Scheer, 2012]
ADVANTAGES AND DISADVANTAGES OF INTERRELATIONSHIP BETWEEN
ORGANIZATIONAL FUNCTIONS AND THEIR IMPACT ON ORGANIZATIONAL
STRUCTURE
Advantages of the interrelationship between organizational functions
o It maintains cooperation
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The interrelationship between different organizational functions builds and maintains
coordination and cooperation among the employees.
o Improves overall effectiveness
Proper coordination between the functions not only increases the effectiveness of the team or
department but it also brings effectiveness in overall operations of the Tesco (Ortiz de‐ ‐
Mandojana and Bansal, 2016).
o It brings specialization
When the employees of each department perform their activities repeatedly then the company
can use this as a tool for gaining a sustainable competitive advantage over its competitors.
o Avoids duplication of work
When all the activities are allocated according to functions then it avoids the situation of
duplication of work in the organization. The work allocated according to their functions will
help the organization to achieve efficiency and effectiveness.
Disadvantages of the interrelationship between organizational functions
o It may harm other functions
All employees have information about other functions and they can also use that information to
harm other departments. The conflict between any departments will affect the overall
operations of the Tesco.
o Increases competition
The interrelationship between the functions also increases the internal competition which may
or may not have positive results. Competition in the functions means the wastage of resources
and loss for the company.
o Demotivates the employees
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The management hesitates to promote or transfer the employees because they become
specialize in that particular area and if they promote them then they will not find such skilled
employee for the vacant position. Such an approach of the management increases
demotivation among employees (Albrecht et al., 2015).
o Lack of coordination
The main aim of each functional unit is to increase the production and performance of the
employees. In order to achieve the unit goals, the coordination between different departments
has to be compromised. Non-coordination of these activities means delays in work, competing
interests and wastage of time.
Impact on organizational structure
The interrelationship between the organizational functions will have both positive and negative
impact on the organizational structure. From the positive point of view, it can be said that
interrelationship between the organization increases the profitability, reputation, efficiency,
performance as well as productivity of the whole organization. It shows that managers
successfully manage and control the activities of their respective department and along with
coordinate with other departments as well. Interrelationship brings efficiency and stability in
the Tesco because each department uses a similar process and everyone knows this process.
Therefore, this coordination also helps the Tesco to bring economies of scale in the
organization (Brunsson and Olsen, 2018).
This interrelationship also has a negative impact on the organization as in the case where there
is poor communication between the departments. Poor communication or conflicts in the
departments will bring negative results and it may indirectly affect the image of the Tesco. Even
the customers may also suffer and become frustrated if they cannot get the products due to
lack of coordination.
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