Business and the Business Environment: An Analysis of Primark

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BUSINESS AND THE BUSINESS
ENVIRONMENT (ICN)
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Executive summary
Businesses are impacted both positively and negatively by the external factors present
in a business environment. There are three different types of organisation such as
voluntary, public and private organisations. The legal structure and their mission, vision
as well as background details have been discussed in detail. The study has provided an
analysis of organisational functions and structure as well as interrelationship among
them. Critical evaluation of micro and macro factors has also been provided. The study
has taken the help of PESTLE and SWOT analysis to analyse the same. Advantages
and disadvantages have also been discussed about the interrelationship of functions in
an organisational structure of the chosen organisation that is Primark.
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Table of Contents
Introduction...................................................................................................................... 4
LO1: Types, size, scope of organizations........................................................................4
P1: Purposes and types of organizations.....................................................................4
P2: Size and scope of organizations.............................................................................6
M1: Structure, scope and size of organizations and link to business objectives as
well as services.............................................................................................................8
LO2: Interrelationship with functions and link to organizational structure.........................8
P3: Relationship with different organizational functions and its link to company’s
structure along with objectives......................................................................................8
M2: Advantages and disadvantages of the interrelationships.....................................9
D1: Complexities of various types of business structures and interrelationships........10
LO3: Macro environment positive and negative impacts on operations of business......10
P4: Identification of positive and negative impacts with the help of PESTLE model...10
M3: Analysis of macro environment as per PESTLE model.......................................11
LO4: Determination of internal strengths and weaknesses..........................................12
P5: Internal and external analysis of organizations to identify strengths and weakness
.................................................................................................................................... 12
P6: Interrelationship of external macro factors with that of strengths and weaknesses
.................................................................................................................................... 13
M4: SWOT analysis and its impact on decision making.............................................13
D2: Critical evaluation of micro and macro factors on business.................................13
Conclusion and recommendation...................................................................................14
Reference list................................................................................................................. 15
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Introduction
Within a business environment there are large number of and different types of
organisations that operate for specific purposes. In this study mission, vision and scope
as well as size of these three types of organisation have been discussed. The
organization structure as well as business objectives have also been analysed for each
of them. SWOT and PESTEL analysis have also been provided in the context of the
chosen organisation Primark that is a retail organisation in UK. The problem statement
of the study is to discuss about different types of organisations that operate in a
business environment.
LO1: Types, size, scope of organizations
P1: Purposes and types of organizations
There are three different types of organisations in a business environment these have
been identified to be mainly, private, public and voluntary organisations.
Background details:
Private organisations
Private organisation as per the opinion of McLaughlin (2018:96), are those
organizations that are mostly operated under the structure of partnership, corporation or
agency. These are owned by government and the type of organisations operates only
for profit making motive. For example, Primark is a type of private organization that
functions under a retail organisation. It has its headquarter in London, United kingdom.
It is a fashion retail company established since 1969 (primark.com, 2019).
Public organisations
Public organisations are controlled by government and are also operated under the
control of state government, local authorities and central government. For example
National Health Service is a type of public organization that is established to provide
healthcare service to the citizens of UK (nhs.uk, 2019).
Figure 1: Types of organisations
(Source: learner)
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Voluntary organisations
Voluntary organisations are mainly those organisations that are established for
addressing social challenges and social causes. These are also called non-profit
organisation as their motive is not to earn profits. In the opinion of Meyer & Peng
(2016:197), volunteers or group of people join together to form an associations that
serves social purposes. For example Oxfam international is a form of voluntary
organisation that was established in 1942 and has its headquarters in Oxford, United
Kingdom. It is a confederation of 20 charitable organizations (oxfam.org.uk, 2019).
Services and products:
Private organisations
Private organisations generally provide products such as foods, drinks, fashionable
products, cosmetics and others. For example Primark provides fashionable clothing to
its large number of customers.
Public organisations
Public organisations usually provide those commodities or service that essential for
citizens of a country. This includes healthcare services, law enforcement, education,
emergency services and others. For example National health services offer healthcare
services at affordable prices to the citizen of UK at large.
Voluntary organisations
Voluntary organisations usually provide services and this include looking after the needs
and demand of vulnerable groups such as elderly, homeless youths, mentally sick
patients and children. Moreover they address various types of social challenges and
curb the harmful impacts of poverty, famine and others. For example Oxfam
international has employed large number of volunteers to look after the needs of the
vulnerable groups. It also raises funds to support social causes.
Legal structure:
Private organisations
Private organisations operate under four types of legal structures such as sole
proprietorship, Limited Liability Company, partnership and corporations. These are
governed under Companies Act 2006, Insolvency Act 1986 and UK corporate
governance code. It has been seen that the sole proprietorship is run by a single
owner and there is no individual identity of the company. This means that the business
entity and the owner of the entity are not treated as separate individual (Aguilera &
Crespi-Cladera, 2016:50). However in case of partnership, corporations and limited
liability companies the organisations have separate legal identity from that of its owners.
In case of limited liability partnership companies the partners’ liability towards the
company is limited to the extent they have contributed capital in the firm. In case of
partnership that is not limited by liability, the liability of the partners is unlimited. In case
of corporation it has been seen that it is usually established by a group of people and it
is of two type That is either formed to issue stocks or to make profit. Primark is
established under the limited liability partnership (primark.com, 2019). This means that
the partners to the firm have limited liability to the extent of their capital contribution in
case of Primark.
Public organisations
Public organisations are basically found to operate under the legal structure of public
limited companies in UK. It has a minimum level of statutory capital and it has been
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seen that it can of both types that are listed and unlisted companies. The public
companies can issue their shares to obtain capital for running the business. The
companies operate under Companies Act 2006. Moreover it has been identified that
the public limited companies are required to be registered by the companies’ house. In
addition to this the legal structure of public organizations help them to enjoy benefits
such as simple registration process, ownership by foreigners, low level of share capital
and secure political as well as legal system. National Health Service also follows the
legal structure of public limited company.
Voluntary organisations
Voluntary organisations’ legal structure is divided into different parts that is voluntary
organizations operate as a trust, or an unincorporated association, a company limited
by guarantee and charitable incorporated organisations. It has been seen that there are
other form of legal structures including, community benefit society, community Interest
Company, royal charter bodies and cooperative societies. In case of trusts there are
only trustees and no one is member and it is mostly of unincorporated type. In addition
to this there is risk of personal liability. Company limited by guarantee, the risk of
personal liability is removed. However in case of Oxfam it has been seen that the legal
structure is more relevant to that of charitable incorporated organisations. Under this
there are both trustee and member and it has separate legal entity. Furthermore it has
been found out to be that Oxfam has to comply as per the rules mentioned under
Charities Act 2011, and Charities and Bribery Act 2010.
P2: Size and scope of organizations
Size and scope:
Private organisations
In case of private ordination it has been found out that in UK itself there are at least 3.4
million sole proprietors, 414000 partnership firms and 1.9 million limited liability
partnership companies (Bromley & Meyer, 2017:939). The size in this case is seen to
be big in comparison to that of other two types of organisations. The scope of private
organisations is seen to be large as they are reaching large number of customers by
providing them different types of goods and services. The organizations held privately
have a large span in terms of the number of services and products they provide. For
example the scope is wide as some organizations are operating under retail industry,
some are operating under manufacturing and other industries as well. In relation to
Primark, number of employees has been observed to be 70000 (primark.com, 2019).
Public organisations
In UK the size of public companies is seen to be large however in comparison to that of
private companies it is seen to be less. This is because the there in total 2600 public
companies that are listed on the London stock exchange (Prajogo, 2016:241). Moreover
its size can be understood with the help of the number of people that are employed
under public organisations. These have been found out to be 3.14 million and 2.05
million in both central and local government companies respectively (Al-Saleh &
Mahroum, 2015:260). The scope of such firms is large as public organisations operate
under different areas such as healthcare services, gas and oil as well as energy. Thus
it can be said that the scope of public companies is larger than that of the private
companies. Since its services are for all the citizen of UK and customers are not based
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on any target groups. In case of National Health Service, it has been found out that 1.5
million people are employed (nhs.uk, 2019).
Voluntary organisations
Voluntary organisation size is identified by the number of people it has been able to
employ over the year. It has been seen that, 765000 people of UK work in voluntary
organisations (Schwabenland, 2016:74). Moreover there are around 160000 voluntary
organisations in UK that work for the upliftment of the vulnerable groups (Al-Haddad &
Kotnour, 2015:234). Scope of voluntary organisations in UK is wide as it help in serving
the needs of children, women, mentally ill patients, drug addicts and other poor as well
as other vulnerable elderly. For example Oxfam has employed 22000 volunteers and
5300 permanent staff (oxfam.org.uk, 2019).
Mission and vision:
Private organisations
Private organisations aims to achieve competitive achieve and higher amount of profit
for longer period of time. In case of Primark it has been found out that its mission and
vision is specifically derived towards increasing customer base and provides best
quality of fashionable clothes (primark.com, 2019).
Public organisations
Public organizations aim to provide services and good for the betterment of the society
and also aim to offer low cost services to its customers. In case of National Health
Service the mission and vision is generally aligned towards people with best healthcare
facilities at low cost (nhs.uk, 2019).
Voluntary organisations
The mission and vision of Voluntary organisations is not influenced by the idea of profit
making rather it aims to make the life of people better. For example in case of Oxfam it
has been identified that the mission is to rebuild the lives of large number of poor people
and other vulnerable groups. It also aims to make the life of children better by providing
them with education opportunities.
Stakeholders:
Private organisations
The private organisations have mainly three types of stakeholders these are employees,
shareholders, and customers. However due to corporate social responsibility other
stakeholder of the companies include the society at large. In case of Primark its 70000
employees and customers as well as shareholders are its main stakeholders.
Public organisations
Public organisation in addition to customers, shareholders, and employees, for public
organizations, the stakeholders include the citizens of a country as whole as well as the
society at large. In case of the National Health Service, healthcare users, healthcare
providers, and the society are its stakeholders.
Voluntary organisations
In case of voluntary organisation it has been found out that the stakeholders are mainly
the large number of and different types of vulnerable groups. These includes, elders,
children, poor and deprived people as well as others. Oxfam’s stakeholder includes
children, elderly and poor as well as vulnerable group of people. Moreover it also
comprises of the employees, volunteer and other interest groups.
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M1: Structure, scope and size of organizations and link to business objectives
as well as services
The structure and size of the three types of organisations are closely linked to the
business objectives as well as the type of services or products they provide. For
example in case of the Primark, its business objective of increasing customer base and
make profit is linked to the type of legal structure it belongs. The profit making motive
helps it to identify with that of limited liability partnership type of company. On the other
hand, it has also been seen that Oxfam’s objectives and type of service has helped it
identify it as a voluntary organisation that operates as a charitable organizations. In
case of National Health Service it has been seen that its objective to alleviate people
from health related problem has helped it to make its scope and size wider. The three
type of organisation have defined their scope as per the type of service and aim their
way to fulfil (Daft, 2015:114).
LO2: Interrelationship with functions and link to organizational
structure
P3: Relationship with different organizational functions and its link to company’s
structure along with objectives
Figure 2: Organisational structure of Primark
(Source: primark.com, 2019)
The chosen organisation out of the three type of organisation has been chosen to be
private organisation. Under this Primark has been selected that comprise of different
types of functions as per its organizational structure. The main function of Primark is to
provide customers with fashionable clothing and hence operations are its main division.
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Under this it has been seen that work related to buying large amount of material of
clothing and warehousing as well as making it available in the various stores located
across UK is included. On the other hand supply chain management also firm the
essential part of operations department (Kolk, 2016:23). The effective management of
supply chain helps in adding value to the products at various stages of production.
Efficient management of operation department help in increasing the sales as the cost
of production is mainly reduced and the operations are made cost effective with proper
management. With increase in sales the profitability of the firm increases. Moreover the
top management of the firm that comprises of CEO, chairman and other directors help
in making decision related to expansion as well as adopt strategies. With the help of
proper decision making and strategies revenues along with profits can increase. On the
other hand it has also been seen that the finance department help in making budgets
and analyse the performance of the firm over a period of years (Hallward-Driemeier &
Pritchett, 2015:121). The reports prepared by the finance department help the top
management further to take effective measures and take preventive steps. In addition to
this the advertising department helps in promoting the product of Primark on different
channels such as social media, big hoarding at roads and on its official websites
(primark.com, 2019). The advertising strategies taken by the company helps in
increasing the sales in turn. Thus it can be said that the function such as sales,
operations, marketing and furnace all are interlinked to each other.
M2: Advantages and disadvantages of the interrelationships
Advantages
● The interrelationships that exist between the different function of an organisation
help in eliminating the errors or faults in the process. For example it can reduce
the inefficiency found in budget with the help of re-evaluation done by the finance
department as well as the top management analysis (Smither et al. 2016:85).
● Moreover it also helps in increasing the productivity of an organisation. Since
each and every function is interlinked to each other hence if one function is being
efficiently carried out then it also helps in turning the other functions effective as
everything is required within a specific time period.
● For example Primark’s effective marketing strategy help in enhancing operation
process as well as increase sales.
Disadvantages
● Interrelationship with other function within an organisational structure makes the
employees and process too dependent on each other (Johnson et al. 2017:57).
Thus reduces the efficiency of employees. The employees become lazy to take
any form if imitate as they think that top management or marketing department
would come up with strategies.
● In addition to this it has also been identified that interrelationships among the
functions and department prove to be costly as one function is dependent on
other. For example the sale department is dependent on operations. If operation
department is too late to meet its target then sales would suffer as a result.
Impact
● Impact of interrelationship on the organisational structure is seen to be largely
positive. This is because interrelationship makes the decision making easier as
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authority is delegated at each level (Jiang & Liu, 2015:126). Each and every
function has it heads who are responsible to take decision related to that specific
function. This improves the organizational processes further. Primark’
organisational structure is seen to be positively impacted as it has different
people to look at different functions and this improves the quality of decision
making.
D1: Complexities of various types of business structures and interrelationships
Since the business structure of Primark is that of limited liability partnership hence the
complexities are less. The company is only required to follow the Companies Act 2006
and other rules as per the UK legislation. The complexities are mainly found in regards
to maintain corporate governance rules. The firm has to take responsibly to take care of
the needs of its customers, and other stakeholders at large. In relation to complexities
that arise due to interrelationship between functions, it can be said that the
organisational structure of Primark is effectively designed. This has helped it to reduce
the problems such as lack of communication (primark.com, 2019).
LO3: Macro environment positive and negative impacts on operations
of business
P4: Identification of positive and negative impacts with the help of PESTLE model
Political ● Post Brexit the political of UK is
highly unstable (Bouckaert et al.
2016:96).
● It has reduced the number of
exports and imports to countries
located in EU
● Due to this the overseas sales has
declined impacting the profitability
of Primark negatively.
Economical ● Inflation rate has decreased in UK
to 2.1% (statista.com, 2019).
● This has impacted the demand
rate in regards to clothing
positively.
● Reason for this is that the
purchasing power of people has
declined. Thus their buying rate
has also increased (Morcol et al.
2017:85).
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Social ● In reference to social effects it has
been seen that the online clothing
stores and retailers have seen to
be more benefitted.
● This is because people have
started buying from online stores
more and the rate is 87% of the
total sales in UK (statista.com,
2019).
● Thus the firm an overall negative
impact with regards to social
preference as it has low online
presence.
Technological ● In terms of technology the firm
uses all advanced forms of
technology to produce the best
quality of clothes.
● Thus it is able to make it products
cost effective (primark.com, 2019).
Legal ● In legal terms it has been found out
that the firm is able to follow all
rules and regulations underline
under Companies Act 2006 and
corporate governance code.
Environmental ● In regards to environmental laws
and regulations the company uses
less carbon emitting machines and
products (Kozluk & Zipperer,
2015:155).
Table 1: PESTLE analysis
(Source: learner)
M3: Analysis of macro environment as per PESTLE model
The political stability of UK is seen to be impacting the sales of Primark negatively. This
is due to the reduction of overseas sales have declined due to the restrictions put on
exports and imports to EU countries. In case of economic compensation, the inflation
rate has declined and this has increased the sale sin the domestic region of Primark
that is UK itself. Purchasing power of people has increased and this has improved the
rate of demand for Primark products. In case of social preference again the impact is
negative as people have started buying online more. Legal and environment as well as
technological factors have not much significant impact on the sales of Primark.
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LO4: Determination of internal strengths and weaknesses
P5: Internal and external analysis of organizations to identify strengths and
weakness
Strengths
● Applying new technology and
innovative ideas
● Good quality products at cheap
rates
Weakness
● Low productivity rate
● Poor working conditions
Opportunity
● Online shopping
● Opening of new stores
Threats
● Uncertainty in business
environment
● High competition with rivals
Table 2: SWOT analysis
(Source: learner)
● Strengths
Due to its valuable products and low prices of goods Primark has enjoyed a big success
in last couple of years. Their using of new technology, innovative ideas and low-price
products has attracted lot of customers towards them. Primark core strength is they
offers cheap rates on products that has managed them to create a better market
strategy and increase also has increased their profit. Primark new innovative design on
clothes has helped them to increase in their demand for products. As opined by Prajogo
(2016:241), they also focus on their employees by providing them knowledge about
using the new technology and increase their production. And they also focus on
employee’s rights, flexible working conditions which is also a main strength of Primark.
● Weakness
Biggest weakness of Primark is, they face a low productivity rate in their organization.
Due to ineffective management, lack of employee training and using of outdated
technology mainly causes a low productivity in Primark. Employees those are not
properly trained or do not have the sufficient knowledge about work often results in
lower productivity in the organization. As mentioned by Kolk (2016:23), another major
weakness Primark faces is poor working conditions within the organization. Inadequate
working place often hampers employees and hence lowers the productive rates and
decreases revenue of Primark from market. Not providing flexible working condition
often leads to lower the productivity rates and profitability from market.
● Opportunity
Primark has ventured in online shopping websites that has increased their opportunity in
demanding of more products. As said by Al-Saleh & Mahroum (2015:260), through
online shopping customers can get all the information about the products and their
respective prices. This idea has attracted many customers towards Primark and thus
increased their profitability ratio in market. Primark through its online shopping strategy
shows various innovative design products that attracts their customers. Thus in today’s
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