Analysis of Business Environment: Types, Size, and Scope

This report examines the business environment, focusing on the influence of internal and external factors on organizational functions. It begins with an introduction to the business environment, highlighting the impact of aspects like political, economic, social, technological, environmental, and legal factors. The report uses Hennes & Mauritz (H&M) as a case study, covering different types, sizes, and scopes of businesses. Task 1 explains various business types, including sole traders, partnerships, private and public limited companies, and government and charity organizations, and their characteristics, advantages, and disadvantages. Task 2 defines organizational structure, differentiating between matrix and functional structures. The report also explores the roles of various departments, such as finance, marketing, information technology and operations, and human resources, and their interrelationships. The report concludes with references.

Business and Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1...........................................................................................................................................1
Explain different types ,size and scope of business....................................................................1
..........................................................................................................................................................6
(Source: organization structure, 2018).............................................................................................6
TASK 3............................................................................................................................................8
TASK 4..........................................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES .............................................................................................................................14
REFERENCES .............................................................................................................................16

INTRODUCTION
Business environment refers to the influence of internal and external factors on the
organizational functions. There are various aspects that can impact on the goals and objectives of
the business that can be internal factors of a company that can affect the productivity and
performance of the firm. On the other hand external factor consists of the outside environmental
aspects such as political, economical, social, technological, environmental and legal. All of these
can impact on the organization performance directly and indirectly (Aterido, Hallward and
Pagés, 2011). Hennes & Mauritz is a Swedish multinational apparel retail company. This is
known for the men, women, teenagers and children fashion. The organization was founded in
around 1947 by Erling Persson. It has a global presence for its fashion trend along with its
collaboration stylised series. The report comprises of different types, size and scope of the
organization. Moreover it also includes relationship between the organization functions, positive
and negative affect of macro environment, internal and external analysis with strength and
weaknesses. It also underpins the strength and weaknesses of interrelated factors of external
macro factors.
TASK 1
Explain different types ,size and scope of business.
Paragraph 1
What is organisation.
Organisation is considered as a social unit in which people work together to achieve one
or more objectives. All organisation have a managerial structure according to which relation
exist between member and activities. It assigned roles and responsibilities to carry out different
task. It is a open system which affect the outside environment and get affected by internal and
external environment. They provide good and services for the welfare of the society (Bryman
and Bell, 2015).
What is the purpose and why do they exist.
Business or organisation generally exist for making profit and also to make differences in
the society. A profit is achieved by selling items above the cost of production. The business is
established to make changes in the society but its main aims remain same. They are the living
entities which provide vehicle for improving people life and the world in which they live. Every
1

organisation have their own purpose to establish like educator open education centre to improve
the learning ability of children while health care centres are open to improve the levels of people
access and quality but all have one common aim which is profit and development of economy.
Kind of sector exist in the UK.
Primary sector : It includes all those industries who are engaging in extraction and
collection of natural resources such as coal mines, farms,oil producers and fishing for the raw
material
Secondary sector : Manufacturing or production industry comes under secondary sector.
It include all the activities which carried out to transform raw material into finished goods. For
example : clothes manufacturer , furniture makers, food manufacturing and textile
manufacturing.
Tertiary sector : It is also known as third or service sector. It include all those activities
which support production and distribution process. It helps in selling and marketing the goods
which are produced under primary and secondary sector. This sector consist of industries which
provide a service such as transport and Finance. For example : banks, insurance companies,travel
agents ,transportation ,advertising ,shops.
Paragraph 2
Sole Trader : It is a business where one individual runs and owns the complete
undertaking. He or she has unlimited liability that means if something happens to its business
than his personal property can be used to repay it. It is the most simplest and inexpensive form as
compared to others forms of business organisation. In this person himself is responsible for all
the profits after tax with all the losses (Carroll and Shabana, 2010). They can employ other
people to help them but they remain only owner.
Advantages :
 Its very easy to set up as it involve low or no legal formalities.
 He or she retains all the profit of the business.
 Information about sole trader is kept private they don't have to share like limited
company.
Disadvantages :
Sole trader find it very difficult to raise fund for business. Due to which they face problem in the
expansion.
2

 All decisions are vested in one person hand so there is no room for others to help them.
They are completely responsible for failure and success.
For example : A small business which is owned by single person comes under sole trader. It can
be any general store,sanitary shop, beauty parlour and electric shop. The person is fully
responsible for its profit and loss.
Paragraph 3
Partnerships: Partnership is a type of organisation where two or more person pools their
skills , money and resources to share profit and loss. It is generally take place under agreement
between parties who are partners and agree to have mutual interest. In this partners share
ownership, responsibility for managing the company and the income and losses arises from
undertaking.
Advantages :
 It 's very easy to set up and maintain . Partner can share the responsibilities and rewards
of the business success.
 Partners can inject additional fund and resources for its welfare.
Disadvantages :
 Due to presence of two or more owners there is a difference of opinion which create
many times big problem for business.
 Profits should be distributed according to every partners contribution otherwise it will
create disagreement between people and affect business operations.
For example : A small business which is undertaken by two or more people to share their skills
and profits. It includes CA partnership firms where two CA come together to exploit the market
opportunities. Joint venture can also come under this category.
Paragraph 4
Private limited company: It a business entity which is held by private person. In this
owner liability is limited to its ownership and holding and it restricts shareholders from publicly
trading shares. For starting private limited there is only need of minimum 1 lakh rupees.
Legal entity and responsibility : A legal entity is responsible to enter into a contract or
agreement, incur and pay debts,sue and be sued in its own right. The director perform this duty
in the private organisation (Charter, 2017).
Advantages :
3

 The person can start private limited company with a minimum of 2 members as per
companies act .
 More fund can be raised as there is no limit on the number of shares.
Disadvantages :
 The shares in a limited company can't be sold to anyone unless all shareholders are agree
on that.
 Financial information filed by the registrar of companies act which can be inspect by any
of its Stakeholders. This provide competitive advantage to rival.
 For example : H&M is a Swedish multinational company owned by private individual.
The company was incorporated by Erling Persson in 1947.
Paragraph 5
Public limited company : A public limited is a company who issue securities to the general
public through an initial public offering and which is listed at one stock exchange. These
organisations are controlled and owned by central and local government. These include health
and education service,defence law and order (Chesbrough, 2010).
Legal structure :
 Local government: It establish rules, laws and regulation for those companies
which are operating at local level or regional level. They pay for the services which
provide by council tax.
Central government: They are funded directly by the government so they have to provide
public service rather than produce for itself. They pays for the public goods and services through
taxation. The company who is operating at national level has to follow different rules and
regulation .
Advantages :
 Large amount can be raised from the sale of shares to the public.
 They generally dominate the market because of its size.
Disadvantages :
 Here anyone can buy the share so there is possibility that company control can go in
some outsider hand.
 As it was established at a large scale so for them customization is not possible.
 For example : NHS service is the public health service centre at UK.
4

Paragraph 6
Government and Charity : Government means association, organization of national or
local government body,tribunal court or regulatory body. Charity organisation is a non profit
organisation whose primary objective is society welfare. They generally depends upon the
donations (Commander and Svejnar, 2011).
Purpose : They does not use any of its fund for profit individual person or society they work for
improving living standard of the public.
For example : Welcome trust is the non profit organisation which works for human welfare.
TASK 2
Paragraph 1
Definition of organisation structure
An organisational structure provide the outlines how different activities are performed so
that firm can able to achieve its goals. It also include how information flow among different level
of organisation. It is a hierarchical arrangement of authority ,communication, rights and
responsibilities of the firm.
Two types of structure are as follows-
Matrix structure : It is also “known as multiple command system”. it a hybrid of
divisional and functional structure. It can create power problems because most arena of the
institution have dual management a functional manager and divisional manager working at same
level and have managing units. It is generally used in large multinational companies because it
allow the benefits of functional and divisional in one business (Craig and Campbell, 2012).
5

Illustration 1: organization structure
(Source: organization structure, 2018)
Functional structure : It is made in the organisation so that each portion can be grouped
on the basis its role. It includes all department which business requires to produce its goods and
services. For example – marketing department,sales department and production department. This
structure is beneficial in small organisation because there all department use its own talent and
knowledge to support themselves.
6

Illustration 2: Functional structure
(Source : Functional structure, 2013)
Paragraph 2
Introduction to various department of organisation
Finance : It is the major department of any organisation without them nothing can be
possible in the business. Finance is required to every business whether is established on large
scale or small scale. They arrange funds for the various activities of business. They continuously
monitor or analyse the fund allotted to various department so that if excess utilisation is
happening than they can know why that is happening. They also analyse in which area business
need future fund (Dahan And et. al., 2010).
Marketing : It is the duty of marketing department to reach out to potential,customers
and investors while creating a good image. It there duty to represent company in outside world.
They plays a important role in promoting the business and mission of the arrangement.
Marketing department is responsible for keeping web content so that anyone searches get
information quickly. Promotion can be done by social,online or personal communication. The
company make people aware about their product through face to face communication and by
displaying it fair and exhibition.
7

Information technology and operations : This department provide information to every
department at right time . They sometimes help in the product development. In today time
generally many work is done with the help of computer. They provide updated software, solve
computer crash problem of employees, provide new technology so that work can be done easily.
It includes project manager, developers ,engineers and data scientists.
Human resource : Human resource is responsible for implementing correct individual at
suitable post who can perform various activities in the organisation. They have to perform many
work in the organisation like compensation, opening new account , reward ,training etc.
for the development of organisation it is necessary that HR department should employ right
person at right place on the basis of their qualities and skills (Drucker, 2017).
Finance and human resource are the two interrelated department if finance does not
provide fund to the HR department than how they can recruit new employee's. If the employee is
not appointed in the organisation than how can business able to perform its operation. As we
discussed above that marketing is very essential for the organisation without them business not
able to achieve its desired outcomes. For this marketing department is highly depend on finance
department as they are responsible for providing fund for advertising and fair and exhibitions.
TASK 3
Macro factors are the external aspects which impacts on the business performance and
activities as well. Although they are beyond the the reach of business but has a significance to
run a business with the consideration of political, economical, social, technological,
environmental and legal aspects. These are not within the organization but has a drastic impact
on the organization operations that may be positive and negative. PESTEL of H&M company is
mentioned as below -
Political factors – Political factors refers the government policies and legislation that
have to follow by the organization in order to run a business successfully. There were various
political events that was beneficial for the fashion houses but there was some unexpected
changes that affect the business of H&M . As there was the political factors that excited the
H&M performance such as there were the terrorism and Brexit affects the business as well.
Brexit was the biggest disaster for the European Union and the United Kingdom because as there
was huge population voted to immigrate the UK from EU (Hilton and Platt, 2013). In mean
while the country was shaking with the vast challenges that was to make the country
8

economically stable in order to do so the countries were focused on give the opportunities to the
small, medium and large industries to maintain the economy. In the international history the
Brexit was the burnt political issue that affect the strong economy of the world.
 Positive : As Brexit was huge challenge to sustain the economy of the country but it does
not impact on the H&M business. As it was encouraging the organizations to establish
the stable economy in the United Kingdom. As after the referendum there was some
shaking events occurred but fashion industry was on its perch. The UK is not at target of
terrorists as they have a strong political policies that restricts terrorist attacks.
 Negative : The negative impact of the Brexit is was it took time to make the economy
stable because when the both of the countries decide to apart from each other. This
political decision made affected the economies on a huge scale that's why H&M also
faces the challenges to stay in the market.
 For an example, the government policies encourages the organisation to enhance the
operations and activities that can meets the H&M profit and country's as well.
Economical factors – It refers to the financial state of the country that makes the nations
strong with its stable GDP and per capita income. As the United Kingdom has a strong economy
that boost up H&M business. The UK is already a developed country but it also gone through
recession at that time it has seen a drastic decline in the growth (Moore, 2016). In order to mange
its economic stability there was a cheap labour cost that was beneficial for the company to
maintain the business cost. Similarly there are some other economical aspects that has positive
and negative impact of the economic aspects that affected the activities of H&M.
 Positive – The Positive impact of the United Kingdom is that it has a strong higher
growth and that provides opportunities for the business expansion. Along with this it can
rising currency rate is also generates the profit for the H&M.
 Negative – In the United Kingdom higher tax rates can impact on the business as it
needs to pay the increased tax to run a business successfully.
 For an instance, if there is a low labour cost in the UK then a H&M can gain the benefits
to save the cost that directly impact on the firms operations as they are getting to more
profit rather than spending.
Social factors – This can be impacted according to the choice, preferences and priorities that
changes continuously. Fashion industry is one of that major industry that changes intensive as
9

the people has variances in their choices. The people who have a high income supports to the
high street brand and it is main target is to provide extensive range of clothing. The brand also
has large volume of customer target to the every income group whether they are belongs to high
or medium income (Ebert, 2011). H&M has a variety of collection for every generation and that
develops a strong brand image among the people. It is necessary for it because the social
visibility is important for the company this establishes a positive image that what a company is
serving to it customer.
 Positive – H&M has a positive image among the public as it is increasingly influenced by
media and celebrities to adopt a luxurious lifestyle and it increases fashion trend that
encourages the sales and gains the profit.
 Negative – If H&M does not launch something new then they can loose the their image
in customer's mind and that may be reason to decline a business profit.
 For an illustration, if the public made the mind that the company is not providing
something new and it is not offering a quality product then the H&M can loose its
position. To maintain the position among public the firm needs to offer a fashion range
with quality so that the people can have faith in the brand for a long run.
Technological factors – This is essential for a company to sustain in the long time. The time is
changing therefore the business terms are also altering with time. H&M should also run with
time if it wanted to grow and maximise the profit. Technology is the best way of innovation that
aids to meet its objectives (Deasy, Meyer, Newell and et. al., 2016). Due to utilization of internet
services such as its websites and other promotional activities it reaches to the mass volume of the
its customers. It also uses technology in its stores to prepares the bill at the counters.
Positive – H&M gains the profit through technology as its customers can easily purchase
products without moving towards the store. It supports in the other operations and activities of
the stores such as the billing and so on.
Negative – An organisation adopts a technology for the convince but it takes a lot of time
to implement the technology in proper manner. If the employees cannot operate it an appropriate
way then the investment can be waste.
For an instance, if H&M has a inventory management system that is for its benefit that
will take a lot of time to deploy the system but if the staff is not skilled and trained to utilize the
software then the expenses will not be valuable.
10