H&M Organisational Structure and Business Environment Report

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BUSINESS AND BUSINESS ENVIRONMENT
ORGANISATIONAL TYPES, FUNCTIONS AND
STRUCTURES

Executive Summary
The report takes under consideration the various types of business organizations and
their sizes of operations. The infrastructure and the interrelationships of the different
departments of the organization of H&M have been discussed. The internal and external
environmental factors of the company have been discussed together with the influences
these have on the growth of the business. The PESTLE and the SWOT analysis have
helped in gaining insights regarding the aforementioned factors.
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Table of Contents
Introduction...................................................................................................................... 3
1. Introduction to provide an overview of different types of organisations and the growth
of the international business environment (LO1)..............................................................3
Types of business organizations (P1)...........................................................................3
Explain the size and scope of a range of different types of organisations (P2, M1, D1)
..................................................................................................................................... 4
2. An explanation of organisations, including: background details products and services
the size and scope of the organisation (LO2)...................................................................6
3. In detail, explain the functions for one of the chosen organisations, using an
organisation chart to show how the functions interrelate and an explanation of how they
relate to structure (LO2).................................................................................................10
Functions of the organization (P3)..............................................................................10
Advantages and disadvantages of interconnected functions and its effects on
organisational structure (M2)......................................................................................12
4. Use contemporary examples to demonstrate both the positive and negative
influence/impact the macro environment has on business operations (LO3).................13
PESTLE analysis (P4, M3).........................................................................................13
How organisations go through the transformation process and overcome resistance to
change in response to the changing market environment (D2)..................................15
5. Determine the internal strengths and weaknesses of specific businesses and explain
their interrelationship with external macro factors (LO4)................................................15
SWOT analysis (P5, P6).............................................................................................15
Key external macro factors including the competitive environment and government
intervention that influence organisations and business (M4, D2)...............................16
Conclusion..................................................................................................................... 17
References.....................................................................................................................18
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Introduction
The following study focuses upon the organization of the H&M and its relevance in the
environment of the business. Here the various types of organizational structures are
discussed which helps in the determination of the company goals and ambitions. The
analysis of organizational processes focuses on achieving the targets of the company.
In this report, the purposes of the diverse business organizations are discussed along
with their size and scope regarding the growth of the industry. The interrelationship of
the organizational functions is analyzed and the impact of the market forces on the
company growth is ascertained. The PESTLE factors are taken under consideration and
thereby the improvements leading to more profitability has been determined. The
transformational stages of the company H&M with respect to the changing
environments are reviewed.
1. Introduction to provide an overview of different types of organisations and the
growth of the international business environment (LO1)
Types of business organizations (P1)
Public sector
The organizations working under the public sector, like the British Council are controlled
and administered by the government, either central or the state. These are mostly
funded by the public or other governmental agencies. These companies mostly work for
the welfare of the citizens. The governmental companies undertake many outsourcing
processes, where many private enterprises are involved. In this method, the goods and
services are produced by the taxes generated by the public. The public sector
companies are established in health organizations, educational institutes, defence
companies, law and order groups and even social as well as welfare industries.
Private sector
The private companies like the H&M and many other organizations work through the
processes of sole proprietorship or partnership modes (About.hm.com. 2019). The
range of private sector companies is far greater than the public sector industries.
Certain individuals run the private sector companies and government plays no role in
the generation of profits or any other investment purposes. The main intention of these
private organizations is to make profits by understanding the market trends, demands of
the customers and the strategies of the competitors. They focus on providing good
quality products at affordable prices and thereby gain more profits than the competitors
gain.
Voluntary organizations
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The voluntary companies function for the social welfare and these are mostly non-profit
and non-governmental organizations. Their main goal is to make improvements in the
livelihood and other welfare processes of the society. They ignore the profit margins
obtained and the donations obtained from the public are further invested for the benefit
of the society. The companies involved in the voluntary companies focus upon the
climate factors, providing housing to the underprivileged sections and work for those
sections of the society, which requires support. Over 125,000 voluntary organizations
are present in the regions of the UK and there income is less than 100, 000 pounds
(Hellwig et al., 2015). These are generally local enterprises and the staff working for
them is often unpaid. The primary goal of these social enterprises is to work for the
greater good of the society, instead of making profits.
Not for profit organizations
These organizations are exempted from the taxes and mostly focus on charitable,
artistic, scientific and educational aspects. The shareholders and the donors do not
focus on making profits.
Figure 1: Sales Growth of H&M
(Source: Hellwig et al., 2015)
Legal structure
The legal structure of the business organizations depends on conditions like sole
proprietorship, partnerships, Limited partnership, limited Liability Company and
Corporations. For example, Prudential Plc functions a limited liability company.
Explain the size and scope of a range of different types of organisations (P2, M1,
D1)
Depending on the size and scope, the organizations can be classified as large, medium
and small companies.
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Large organizations
The responsibilities of the large organizations are huge and their functions are
associated with diverse goals and objectives. Therefore, the employees hired in these
companies tend to be more than 250 (López-Delgado and Diéguez-Soto, 2015). The
profits and the revenues are higher and they have significant liabilities over their
stakeholders. The investors of these large industries take control of the factors based
on which the company functions. Examples of the large organizations in the UK are
Aviva, Tesco, Unilever and many more. Over 40% of the employees of UK work under
the large organizations and there are 1,868 billion pounds of turnover accrued from
these companies.
Medium organizations
The infrastructure and the hiring of the employees in medium organizations are far less
than the large corporations are. Here, the employees are mostly below the scale of 250.
In the UK, 13% of the people for the companies are medium companies. The annual
turnover generated from the medium organizations has been estimated to be 595 billion
pounds. There has been huge competition amongst the medium companies, and they
plan to develop their businesses by promoting innovative strategies. These companies
focus on the growth and income generation of the nation.
Small organizations
The small organizations employ relatively smaller employees, generally between 10 to
50 staff. Their main purpose of functioning is to survive in the market and therefore the
goals created are for the short term (Wang et al., 2015). The sustainability factor is an
important issue in the small enterprises. These are mostly travel companies, insurance
agents and other consultative companies. For instance, Fourex is a small company
functioning in the UK. The small industries in the UK are 4% of the overall business
operations. The annual turnover has been 590 billion pounds and the employability rate
is 15%.
Micro organizations
The micro organizations employs far below the standard of the large and medium
organizations and the employee count is less than 10 and the turnover of this sector is
£2 million. The small industries make for 96% of the businesses in the UK, with
employability rate of 33%. The capital generated in these small companies is mostly
through bank and micro loans as well as personal funds. The grocery stores like the
Manton Cards are an example of the small companies.
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2. An explanation of organisations, including: background details products and
services the size and scope of the organisation (LO2)
Factors Public
organization
Private
organization
Voluntary
organization
Name of the
organization
British Council H&M Oxfam UK
Background details It provides
educational and
cultural
opportunities.
Career growth and
digital literacy are
the aspects taken
under consideration
by the institute.
Provides clothing
for men, women as
well as children.
Works in 62
countries, operates
through 4500 stores
and employs for
over 132,000.
Over 20 companies
work as charities,
focussing on the
eradication of
poverty. They also
resolve any
emergency issues
of the community.
Vision Create a mutual
understanding
among the different
cultures.
The vision of the
industry is to work
for the improvement
of the living
conditions of the
people and
incorporate
innovative ideas for
the growth of the
community.
The vision of Oxfam
is to work for equal
rights among all the
citizens of the
country.
Mission Provide education
in order to promote
international
opportunities for
citizens of the UK
as well as of other
countries.
To create
sustainable
demand for clothing
through new and
creative tactics.
The mission of the
enterprise is to
empower the
society, create job
opportunities and
remove the
conditions of
poverty
permanently.
Objectives Build trust among
the people of
different cultures
and eradicate the
To educate the
consumers about
the ways to take
proper care of the
To increase the
profitability of the
business and make
expansions. To
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illiteracy factors. garments, and
increase the life
span (Hair Jr et al.,
2015). Also,
motivate the
employees for their
longer retention and
satisfy the needs of
the customers.
improve the
livelihoods of the
children and other
underprivileged
sections of the
society.
Legal structure Public sector
regulated and
controlled by the
government of the
UK.
It is a private owned
company.
It is a non-profit
organization and is
a limited liability
company.
Size Large It is a multinational
organization with
over 4,968 stores.
It is a large-scale
organization, hiring
for over 5300
employees.
Stakeholders Partners and
government
stakeholders.
Reputed partners,
viable customers,
employees and
suppliers.
Donors, employees,
public and private
companies as well
as partnership
industries.
Table 1: Types of organization
Differences between large, medium-sized and small organisations including
objectives and goals, market share, profit share, growth and sustainability
Aspects Large
organizations
Medium sized
companies
Small companies
Name of the
company
Tesco Plc Captify Fourex
Objectives and
goals
To provide quality
services and
develop strategies
to improve
customer
satisfaction.
It emphasizes on
promoting improved
advertising
processes that
would help the
companies to
identify the target
audiences.
The main objective
of the company is
to retain the
existing customers
in order to meet the
basic survival
needs.
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Market share The market share
of Tesco in the UK
is 28%.
The market share
of Captify is 0.12%.
The market share
of Fourex is very
trivial.
Profit share The profits incurred
is £1.3 billion
The profits have
reached £14.4
million.
The profits are
negligible as
compared to the
large and medium
enterprises.
Growth The sales growth of
Tesco is estimated
to be 2.3% of the
overall business
market in the UK.
The growth is
lesser than the
large industries.
Growth possibilities
depend on
expansion and
turnover (Cowling
et al., 2015).
organisational
ethics are followed
to maintain
diligence and open-
mindedness
Sustainability Tesco has
developed
strategies for usage
of clean energy and
is the third
company in the
world to introduce
the policies of
reducing the carbon
footprint (Mason
and Harrison,
2015).
The sustainability
factor of Captify
helps the
employees and the
customers to
develop trust on the
company.
The organization
functions without
compromising the
requirements of
future generations.
Table 2: Sizes of organizations
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Figure 2: Business growth in UK
(Source: Mason and Harrison, 2015)
Global growth and developments of transnational, international and global
organisations
Transnational organizations- the transnational organizations deal with global as well
as domestic enterprises. Nike is an example of a transnational organization, which has
opened factories in different countries.
International organizations- the goal of the international organizations is to monitor
trends, collect relevant information and deliver efficient services to the premium
customers.
Global organizations- the global organizations like World Bank, has made its presence
all over the world.
Market forces and economic operations
The market forces like government regulations, transactions with foreign countries,
conditions of supply and demand and lastly the expectations of the customers helps in
structuring the economic operations of the UK (Bell et al., 2018). Factors like scarcity,
choices, income elasticity determine the sales volume of the company, H&M. depending
on these issues, the operations of the company varies so as to meet the changing
trends in the market.
Differences between franchising, joint ventures and licensing
Franchising- here the company, which is the franchisor, chooses another business
enterprise which acts as the role of the franchisee. The former permits the latter to use
the brand name, logo and the products to make profits.
Joint ventures- two companies come together, to share resources, ideas and even the
revenues generated.
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Licensing- the parent company chooses to sell its own rights on the products and
enables a separate company to make use of the product features and the company
name.
Industrial structures
The industrial structure of the organization, H&M helps in determining the competitors
performing in the same field. There are various types of industrial structures, like perfect
competition, monopolistic competition, monopoly and oligopoly (Rizos et al., 2016).
Competitive analysis
The competitive analysis of H&M is done by identifying the competitors, analyzing the
websites of the competitors and observing the customer reviews. Thereafter strategies
are created to develop the pricing rates, shipping characteristics, and reviewing the
social networking sites.
3. In detail, explain the functions for one of the chosen organisations, using an
organisation chart to show how the functions interrelate and an explanation of
how they relate to structure (LO2)
Functions of the organization (P3)
In any business organization, there are significant interrelationships among the different
departments of the company. This helps in creating the benchmark for the completion of
the tasks within the set time limits. The growth of the profits of H&M is entirely
dependent on the generation of the sales, marketing operations, accounting functions
and capability of the human resources for providing adequate customer service.
Sales & marketing
The sales team of H&M focuses on the designing and the quality management of the
products developed (McMurray et al., 2016). The marketing department of the company
undertakes the advertising and promotional activities for increasing the customer base.
Operations
The finances of the company along with the management of the human resources are
operations team of H&M.
Human resource
In the company of H&M, the department manages the human resources working for the
company so that the employees of the industry get highly skilled. The recruitment
aspects of the company are taken care of by the operational team.
Finance
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The finance staffs ensure that there are enough funds for paying the salaries of the
employees. Moreover, adequate finances are required for managing the marketing and
retailing operations.
Manufacturing
The manufacturing department controls the production processes of the clothing of the
different age groups and gender types. As per the market research and the budget
conditions, the designing of the products are undertaken, such that the demands of the
consumers are satisfied (Roberts, 2018).
Research and development
The R&D emphasizes on the innovative criteria of the H&M such that the profitability of
the company increases. They always relate to the financial condition of the industry so
that the researches they are performing do not exceed the financial capabilities of the
company.
Customer service
The department of customer service deals with effective delivery of the products and
meeting all the customer enquiries and feedback processes. Here, the operations as
well as the HR team helps for the operation of the customer service employees.
Figure 3: Organizational chart
(Source: Roberts, 2018)
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