Business and Business Environment: An Analysis of GSK

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BUSINESS AND BUSINESS
ENVIRONMENT
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INTRODUCTION
Business is an organization involved in commercial, trade or professional activities. In other
words, the business is the activities of the owner to sell and purchase the goods or services with
the aim of earning profit and also to satisfy the needs of society. A business can also be termed
as it is an effort and activities of a person for the production of the goods or services for earning
a profit (Laudon and Traver, 2016).
The business environment is the internal and external environment that affects the business
and its activities. The external factors are the uncontrollable factors while internal factors are
the controllable factors. The factors affecting the business environment are stakeholders,
government, customers, suppliers, creditors as well as owner. These factors directly or
indirectly affect the operation of the business. The business environment helps the owner to
identify the opportunities, threats, plan and allocate the resources for optimum utilizing the
available resources (Kljucnikov et al., 2016).
GlaxoSmithKline plc (GSK) is one of the largest pharmaceutical company headquartered in
London. The company deals in three major segments research, develop and production of
innovative pharmaceutical medicines and healthcare products for the consumer. The main aim
of the company is to provide differentiated and high-quality healthcare products to the
consumer.
The goal of the company is to become the world's most innovative company by building trust
among the customer.
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LO1 EXPLAIN THE DIFFERENT TYPES, SIZE, AND SCOPE OF
ORGANISATIONS.
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Types and purpose of organization
Public organization
A public organization is run and controlled by the government with the aim of providing quality
goods or services for the betterment of society. They are fun and financed by the government
and the government received money or funds through tax (Denhardt and Denhardt, 2015).
Private organization
Private organizations are owned and controlled by the individual or group of people with the
aim of earning the profit. The private organization provides direct benefit to owner,
shareholder and its investors. The capital or funds arranged through a bank loan or borrowed
from shareholders (Melnikov et al., 2015).
Voluntary organization
Voluntary organizations are voluntary run by the trustees with the main aim of not earning
profit but to help and serve to the community. The funds or money are generated through gifts
or donations. The surplus of the organization is reinvested in the organization for its expansion.
The voluntary organization is also termed as a social organization (Booth, 2018).
Difference between public, private and voluntary sectors
Basis Public organization Private organization Voluntary organization
Legal structure Non-profit
organization
Statutory organization
Public limited
Sole proprietorship
Partnership
Companies
Limited liability
Trusts
A company limited by
guarantee
Industrial and
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company partnership Provident Society (IPS)
Community interest
company
Charitable
incorporated
organization
Association
Size The size of the public
organization depends
on the budget of the
government.
The size of the private
organization depends
on the capital invested
in the business.
The size of the
voluntary organization
is measured by the
number of member or
funds invested in the
voluntary organization.
Scope The scope of the
public organization is
very less because of
the increasing
dominance of private
organization.
The scope of the
private organization is
very large as compared
to a public and
voluntary organization.
The voluntary
organization is made
up of different groups
and organization which
is based on culture,
membership, mission
and organizational
culture.
Stakeholders Media
Employee
Interest groups
Shareholders
Investors
Managers
NGOs and other
entities
Communities
Structure, size, and scope of different organizations link to the business objectives and
product and services offered by GSK
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The objective of three strategic priorities of the company is to enhance the growth, minimizing
the risk and to enhance the long-term performance of the GSK. The objective of the company is
dependent on the structure, size, and scope of the organization. The large size, legal structure
as a corporate and the scope of the company contributes to achieving the organization’s
objective.
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P2
Size and scope of organization
Public organization
The scope of the public organization can be categorized into departmental undertakings,
statutory corporation, and government companies. These categories are completely or partially
owned, managed and controlled by the government. The basic objective of the public
organization is to serve the people of the country. The size of the public organization changes
according to duration, government structure, and function (Wickert et al., 2016).
Private organization
The government has no control over the operations of the private organization. The resources
and activities of the private organization are possess by the private company. The scope of the
private organization can be categorized as a sole proprietorship, partnership, Limited Liability
Company, and non-profit organization. The size of the private sector is high as compared to the
public sector. This is because, in a developed and capitalistic economy, the private sector has
the responsibility to increase the investment, increase the job opportunity and is also
responsible for improving the standard of living of the people (Johnson et al., 2017).
Voluntary organization
The size of the voluntary organization of the UK contributes a total of £11.7 billion in its
economy. The size of the voluntary organization is increasing in the UK economy as this sector
is a major employer. According to the UK Civil Society Almanac (2012), approximate 765,000
people of the UK work in the voluntary organization.
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LO2 DEMONSTRATE THE INTERRELATIONSHIP OF THE VARIOUS
FUNCTIONS WITHIN AN ORGANISATION AND HOW THEY LINK TO
ORGANISATIONAL STRUCTURE.
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Relationship between different organizational function and link with the organizational
objective
The organization functions of the GSK are worked together to achieve the organizational
objective effectively and efficiently. The functions of the company are explained below:
Production function
The role of the production function of the company is to produce quality medicine and health
care products. The production manager is responsible for planning and scheduling the
production process. Further, managing inventory and control and maintenance of plant and
equipment are also included in the production function (Montresor and Vezzani, 2015).
Marketing function
The marketing function of the GSK is concerned with identifying the needs of the customer and
then to satisfy it by providing quality products. Marketing department deals with product, price,
distribution, and promotion. The main aim of the marketing department is to make
differentiation in the minds of the customer against the competitors and also to make a long-
term relationship with their customers.
Human resource function
The human resource function of GSK is responsible for recruiting and selecting the right person
for the right job at the right place so that the organization will be able to achieve its objective.
The human resource department also provides proper training and development, health and
safety security, grievances, disciplinary matters and other related activities associated with
employees (DeCenzo et al., 2016).
Accounting and financing function
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The accounting and financing function of the organization keeps the record of all financial
transaction, preparing all financial reports and documents and all other financial statement
such as profit and loss statement, cash flow statement, balance sheet etc. to provide
information to its stakeholders especially investors because they invest their money in the
organization so they want to know the usage and expenditure of their money.
Research and development
Research and development are developing new products or improving the existing one to
ensure that the company is able to provide the exact product to the customer in an economic,
efficient and effective way. The GSK is having a separate function of research and development.
This is because the need and preference of its customers are continuously changing. They
demand more innovation and unique products so they can fulfill their needs with the
company's product (Vannice et al., 2016).
Coordination in these functions directly helps the company to achieve its goals. The objective of
the company is to increase its market share, minimizing risk and to improve the long-term
performance of the company. The objective cannot be achieved by any of these functions but it
can be achieved by the coordinated effort of all the organization. Thus the top management
must ensure that all the activities of every department must be coordinated and well supported
to achieve the organizational goal.
For instance, the research department of the company highlights the information and
characteristics of the product so that the production of the company should be according to the
needs of the company. Further, these activities cannot be done without finance and human
resource. The respective department is responsible to provide proper funds and human
resource to the organization so that they will contribute in overall objective. Additionally, the
marketing department of the company takes the decision of pricing, promotion, and
distribution of the product so that the goods must be delivered to the customer at the right
time.
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LO3 USE CONTEMPORARY EXAMPLES TO DEMONSTRATE BOTH THE
POSITIVE AND NEGATIVE INFLUENCE/IMPACT THE MACRO
ENVIRONMENT HAS ON BUSINESS OPERATIONS.
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Positive and negative impact of macro environment on the business operation
It is very important for the GSK to understand the impact of the macro environment of the
company because the macro environment is an uncontrollable factor but it directly affects the
business operations of GSK. The risk factor is always present and also it is difficult for the
organization to identify the risk in advance (Marttunen et al., 2017). The positive and negative
impact of the macro environment on the GSK can be analyzed through PESTLE analysis.
PESTLE analysis
 Political factors
Political factors include tax regulations, government rules, and regulations and trade control;
these factors have a negative impact on the business operation of GSK because the company
has its operation in the international market. Therefore the company has to follow the rules
and regulations of different countries. The company has the pressure of different government
related to health issues because the medical industry is a highly regulated industry in which
government plays an important role in regulating the activities of the company. Also, the
government has its impact on the employee related benefits such as minimum wage,
employment benefits, etc. Further government has its interference in product labeling and
packing (Galliford and Furnham, 2017).
 Economic factors
The macro environments affecting the business operation are inflation, saving rate, foreign
exchange rate, and economic cycle. While on the other hand, the microenvironment of the
economic environment includes competitive norm i.e. their impact of competition on the
business operation of GSK. It will have both negative and positive impact on the company, it will
be the great opportunity if the country’s economic factors i.e. the economic growth rate or the
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situation of inflation will contribute in the growth of GSK (Bastani et al., 2016). But if the
exchange rate, education level or unemployment rate of any country does not support the
business operation then it will have a negative impact on its business.
 Socio-cultural factor
Impact of socio-cultural factors can be seen through the behavior of the people towards their
health. If the people of a particular country are more health conscious and if they prefer high
quality of medicine or products then it will contribute towards increasing their sales and the
reverse is also true. Additionally, the educational and skill level of people of a particular country
also affects the business operation. More awareness and consciousness among the people lead
to more sales of the company (Gupta, 2018).
 Technological factors
It is very important for the medical company to invest in the research and development for its
product improvement and development. Technological factors have a negative impact on the
business operation. With technological development, the company has to spend huge funds in
conducting research in the field of science and medicine. This factor is very important and the
company cannot ignore this factor as an investment in adopting new technology will bring
higher long-term profit to the company.
 Legal factors
To operate in the domestic as well as international market, the company must have to follow all
the rules and regulation of the country. The healthcare business is highly regulated and all the
companies have to follow the rules of the company so that the company can have a smooth
operation in the home as well as the host country. The factors that negatively and positively
affect the company’s operations are employment law, health and safety law, copyright, patent,
trademark, and intellectual property rights. Even the company have to follow the law of data
protection; the company is not allowed to share the personal or professional information of its
stakeholder with anyone (David et al., 2015). The company should have to conduct deep
research to find out that whether the products of the company is banned in a country and if so,
the company should come up with the alternative option for maintaining its position in the
market.
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 Environmental factors
Different countries have different norms for environmental protection which affect the
operation and profitability of the company. Even in one country, the environmental law for
every country is different from another. The company should conduct proper research to follow
the environmental laws of a particular place. This will help the company in building a positive
image in the minds of their customers which will directly increase the sales of the company.
Therefore, the environmental factor will have a positive impact if the company invest their
funds in the CSR activities for maintaining the relationship with the customer and to save the
environment (Lee et al., 2015).
Therefore economic, socio-culture and technological factors have a positive impact on the
business operation if they were properly analyzed. These factors increase the profitability and
sales in the host and home country. While on the other hand, political and legal factor
negatively impacts the business operation. This is because the pharmaceutical industry is highly
regulated, the operations and the decisions of the GSK are directly affected the government
rules and regulations.
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