Business Environment and Strategic Analysis of River Island (Report)

This report provides a comprehensive analysis of River Island's business environment, encompassing both internal and external factors. It begins with an introduction to the business environment and then delves into the different types and purposes of organizations, including public, private, and voluntary sectors, with a specific focus on River Island's legal structure. The report examines the size and scope of various organizational types, followed by an in-depth look at organizational structures and functions. A key component of the report is the identification of the positive and negative impacts of macro-environmental factors on the UK retail market, utilizing PESTLE analysis. Furthermore, it conducts an internal and external analysis to identify River Island's strengths and weaknesses, and explores the interrelation of these with external macro factors. The report concludes with a summary of findings and relevant references, providing a complete overview of River Island's strategic positioning within the UK retail sector.

Business and Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Different types and purposes of organisations; public, private and voluntary sectors and
legal structures for River Island.............................................................................................1
P2: Size and scope of different types of organizations...........................................................2
TASK 2............................................................................................................................................4
P3. Organisation structures and functions..............................................................................4
TASK 3............................................................................................................................................6
P4. Identification of positive and negative impact of Macro environment factors on UK retail
market Using Pestle analysis..................................................................................................6
TASK 4............................................................................................................................................7
P5. Internal and external analysis to identify strengths and weaknesses for River Island.....7
P6. Interrelation of strengths and weaknesses with external macro factors for River Island.9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The External and internal factors which affect the functions of an organization is known
as Business Environment. Elements which are under the control of an enterprise are called as
micro or internal factors and those which cannot be controlled are external or macro causes. The
impact of these forces affects the overall performance and effectiveness of a business. This
report studies and describes different kinds of organizations, their size and classifications,
organizational structure and implications of environment determining purpose of a business. It
also identifies factors affecting business operations of River Island, a UK based high street
fashion brand (Teece, 2010). Aim of this project is the assessment of understanding and analysis
about effect on business functions on the retail sector of UK. The way of taking decisions in the
organization is also defined in this report for River Island. For identifying optimistic and
pessimistic aftermath of the external environment upon River Island certain analysis like
PESTLE and SWOT along with Porter's five forces model are also conducted.
TASK 1
P1: Different types and purposes of organisations; public, private and voluntary sectors and legal
structures for River Island
Public Sector Companies- These are organizations controlled and managed by the state
government which work for community and public. Schools, Hospitals are some examples for
this sector. They are companies registered in the stock exchanges with a purpose of purchase and
sale of shares to the general public. The main aim of this type of organization is to provide
services to society and not profit making. Public sector companies are funded by the government
like National Health Services. Their vision is to safeguard and protect health of people in UK
with a mission of regular examination (Hilton and Platt, 2013). Rather producing products for a
profit they tend to supply public services and are funded by the respective governments.
Private Sector Companies- These is organizations owned and managed by private
individuals, partners, joint venture which aims at making profits rather than providing services.
River Island aims at making profits and finds ways of expansion to become a leading brand.
They are not fit for public listing of shares and cannot be registered in the stock exchanges but
they raise money through issuing of shares and debentures or through other money market
instruments. These organizations are mainly divided into two:
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Non-limited Companies and Limited Companies
Profit generated is distributed among shareholders as per the ratio and rest is kept for reserve.
River Island’s vision is to become a popular and star brand in UK with a mission of gaining
profits. Legal documents like Memorandum of association and Articles of association must be
completed before the formation of a company.
Voluntary Sector- It is also called as community sector and is a non-profit organization
owned by an individual but there will be someone to check the attainment of targets (Drucker,
2017). The main aim is to help the social group or society and works for the welfare by removing
partialities in the community therefore profit making is not their supreme goal. Oxfam and
Welcome trust being voluntary associations of UK has a vision of safeguarding the society and
providing health care services. Organizations like DCA and EURAD are working for the
improvement of society thereby eradicating poverty. Activities of these sector involve different
organizations like charity, voluntary bodies and business community. Those are fundamentally
non-profit enterprises and non-governmental organisations focused on rendering social service.
P2: Size and scope of different types of organizations
Structure, size and scope of a business organization determine its goal and success. Large
multinational corporations are set up with an aim of earning profits but micro, small, medium
enterprises also operates to earn revenues and market share. Small to medium size enterprises are
an additional category with a difference between owners, number of employees, market share
and legal status.
Basis Micro Small Medium Large
Operation They have a small
scale of
operations with
relatively less
capital
These are owned
and controlled by
a sole proprietor
or corporation
who has little
scale and scope
and generates less
revenue.
It has a moderate
operation scale
and average
minimum
employment to
workers, it also
generates higher
revenue due to
great investment.
These are big
organizations
with huge
investment of
fund which
enables them to
earn ample of
profits and
revenues.
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Turnover Small and less
than $1 million.
They create a
turnover in
between $1 and
$25 million in a
specific year.
In this sector the
generated
turnover is $25
and up to $250
million in a
specific year.
Here the total
turnover in a
specific year
exceeds $350
million.
Manpower They are operated
under individual
or group of
people and do not
have any workers.
They have
minimum 20 and
a maximum of 50
workers working
at a particular
place and time
(Harmon and
Trends, 2010).
It has
approximately
100 to 120
workers working
at a particular
place and time on
a single program.
The number of
workers is more
than 120 and all
of them are
working for a
common goal of
achieving
organizational
objectives.
Growth and
sustainability
Micro enterprises
have a low
growth rate with a
short
sustainability
period.
Small-scale
enterprises
sometimes
experience high
and low rate of
growth.
Government
provides several
subsidies to
increase
development and
sustainability are
depended on
profits.
Medium scale
enterprises have
an average
growth rate which
is more than
small and micro
businesses and
sustainability as
per the generated
profits.
Large scale
enterprises have a
greater rate of
growth and high
profit earnings
with a long-term
sustainability
which may even
last for lifetime.
Market share They have small It has a not high This sector has a Large-scale
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shares in the
market.
and not low level
of market share.
moderate market
share which is
more than micro
and small-scale
enterprises.
enterprises have a
market share
which is more
than all other
sectors and is
really huge.
Share of profit They do not earn
profits and is low
which makes it
hard to meet the
operational costs.
Small-scale
enterprises profit
share is not so
low and not so
high and covers
the costs of
operations easily.
Government
provides several
subsidies to
promote this
sector.
It has an average
share of profits
which is more
than micro and
small-scale
enterprises
This sector has an
immense profit
sharing
TASK 2
P3. Organisation structures and functions.
The construction of organization is of three types:
Classical structure is a centralized, common in small businesses and has few general
functions with some specific professionals in important positions (Cantwell, Dunning and
Lundan, 2010).
Functional structure divides employees into units according to job or functional area and
followed in large organizations that produce large amounts of products and services. This is best
suited for producing standard goods and amenities with a large volume at low costs. Here
activities are integrated in a way which makes the production limited and predictable thereby
provides chance of efficiency recognition.
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Divisional structure is a more complex construction where it takes functional units and
divides them into divisions which has their own resources and can function independently. It is a
collection of functions for producing a product or service that contains some self-restrained
splits. To measure of level of performance authority delegation is used as it utilizes a plan and
operates according to that.
Matrix organizations are one where the employees are being separated according to team
based on their functions, product or service on which they work and uses the team to complete a
task or specific jobs. This is mix up of two different structures and is dynamic than any other
management. It permits specialization in a specific field that can gain level of knowledge and
complexity of order of command.
Network structure is one where internal and external relationships are managed and
controlled by the managers. It is a new type of construction and is hierarchical, Decentralized
and more flexible than other constructions. Concept of social network interactions is its main
components which maybe open communication and partners who are reliable (Craig and
Campbell, 2012). This is a complex but simple thought and is unique that mainly focuses on the
intrinsic dynamics of a firm.
Modular structure where the focus is on development of differentiated and involuntary
business sections. This divides the enterprise into small Strategic Business Units concentrating
on specific elements of the organizational process. Better communication and intellectual
property gains are produced with increased internalization and combined structures by the
organization.
The functions of an organization and their relationship with organisational structure and
objectives are provided below:
Establish hierarchy- Primary purpose is providing a clear-cut chain of command and
defining the employees subordinates so that they can report to them respectively. Multiple levels
of management are used by many firms where a particular superior is not been assigned to a staff
and can report to the top level managers directly. At each of the levels organizations are able to
determine requirements in effective manner. For example, when a company follows appropriate
structure, then to implement any of the strategies appropriate support is required. Support is
finance is required so that proper management is possible, then it involves operation, HR, etc. so
that they are able to coordinate with each other and work towards attaining common goal.
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Team creation- Developing a team which may include all staff working on a specific
project or task. By setting teams it helps in ensuring that all employees are working towards the
attainment of the fixed target and thus achieve it with teamwork and efficiency. For each of the
business departments like HR, Operations, finance, etc. have their own managers and groups are
formed who are specialized in their own areas. Thus, organizational functions enables employees
achieve the objectives in effective manner.
Human resource management- Employees are the main asset of a business without them
no firm can conduct its operations. River Island maintains a quality business processes and
activity managing by maintaining proper human resource management. For each of the business
operations there are people involved will be effective enough to support the firm grow in positive
direction. As per the structure that is followed within the organization, employees as per their
roles and responsibilities. These are helpful enough for the firm to reach their goals and objective
in effective manner.
Marketing- To gain sales and face competencies a business must look into this factor as
it is really important. It is a must to have an idea about the economy, growth and opportunities
that the business may have (Adeoye and Elegunde, 2012). River island's strategies of marketing
are effective and efficient making them a leading brand in the retail industry of UK.
Finance- Investment is the primary matter which is needed to start a business or firm and
without this no activities can be carried out. All organizations plan a specific budget for its
operational processes before starting the operations. For each of the departments, there are
requirement of strategies applied. For example, for development of new products there is need of
research carried out, then operations take over the role, then falls marketing and distribution. As
per the this function of organization, structure of the firm enables management to reach their set
goals in effective manner. In all these process, it essential to have proper financial support so that
all these aspects can be completed efficiently. All these contribute in attain the organizational
goals.
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TASK 3
P4. Identification of positive and negative impact of Macro environment factors on UK retail
market Using Pestle analysis
UK's economy and GDP of its market is greatly contributed by the retail marketing
sector. A large revenue is created by this sector for the economic system which makes country's
development to rise. PESTLE Analysis of an organization describes the framework of macro-
environmental factors used for knowing or analysing the external environment of strategic
management. Macro-environmental factors affect its merchandising market in UK and it can be
assessed by analysing those with the help of PESTLE are as follows:
Political factors- These forces show a crucial role in determining the long term
profitability in a certain country or market. Government policies and regulations of the retail
industry are the factors which affect the revenue generation in the market (Commander and
Svejnar, 2011). The main political factors which affect River Island greatly are the industrial
relationships and labour laws. River Island, Clarks, M&S eased their activity and dealings of the
firm as a result of political instability. When there are frequent changes identified in fiscal and
monetary policies, then it has negative impact on River Island as they have to make frequent
changes in their prices of products and services.
Economic Factors- UK retail sector economy is vulnerable to economic recessions and
prone to interest rate changes. River Island have been hit by the economic recession of the
country in 2009 and managed somehow managed to set back on its feet. But it had to cut down
2% of their staff and close down a number of stores. It needs to organise a complete economic
analysis to consider the state of economy in the short and long-term. They have had to change
the way they market themselves to try and stay ahead by concentrating more on the fashion
arena. In conditions of inflation or recession faced by any of the countries in which River Island
operates, then the purchasing power of customers gets reduced and thus customers face losses.
Social factors- The lifestyle changes preferences and consumer likes is a threat for the
industry. Demand for a particular company or brand and the way it operates are the main trends
in sociological factors which are completely depended upon the people or consumers. River
Island has modified itself according to the wants of the consumers and people. As the UK people
have a tendency to being loyal to a brand and quality products. Changes in taste and preferences
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of customers take place on regular basis. It is important for River Island to carry out research and
survey on regular basis so that preferences of customers can be identified.
Technological factors- Advancement in technology have a great impact in increasing the
productivity and smooth operations of an organization. River Island has already invested heavily
on latest technologies with the aim of increasing efficiency (Osterwalder and Pigneur, 2010).
The implementation of technology can be beneficial for both retailer as well as customers also.
With time there are changes identified in technology and it is essential that River Island
implement new or updated technology so that better quality of services can be provided to
customers.
Legal factors- For the effective functioning an organization has to follow the proper legal
obligations by a retail company in market of UK. This helps firms like River Island, M&S to
carry out their operations smoothly and thereby produce a good financial performance. At
different countries, there are various laws that are to be followed by companies. In this context,
River Island should focus on following all legislations in order to make people develop positive
perception within the mind for the products and services delivered to them.
Environmental factors- All companies should operate in sustainable environment as this
may affect the business negatively. Customers prefer environmental friendly products
considering the rising environment protection issues. Making changes in River Island’s waste
management and placing concern on nature cordial fabric and raw materials will help the firm
come up with bright fresh ideas which might be effective. Cited firm is required to make sure
that through their products and services, environment is not affected in negative manner.
TASK 4
P5. Internal and external analysis to identify strengths and weaknesses for River Island
SWOT Analysis
Strength- The main strength of River Island is the improvement in business environment's
economic conditions. Growth and development can be increased by adopting advancement in
technology. Through this the production capacity and profitability of the organization can be
enhanced. Effective and efficient customer issue solving can be made easy by a technological
upgrading. This has helped River Island expand their business all over UK and thereby generate
a higher revenue. These strengths are interrelated with external macro factors. This is because the
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firm can attain competitive advantage and make it unique when compared with its competitors.
When company is strong internally, then employees support help to make the business to expand
at other markets as well.
Weaknesses- Most organization are using the traditional method of doing business which are not
helping them in growth and development as the online trading is directly putting impact to the
economy of UK (Trkman, 2010). Cost of operational activities is high and is showing several
faults which all are making the business slow. When firm is weak internally, then it becomes
much difficult to operate externally as firm may face difficulty in operation their tasks in
effective manner. Main focus of cited firm should be to overcome the weaknesses and improve
their performance level.
Opportunities- River Island are giving various possibilities in online shopping business for the
use of different kinds of technology to gain their business around the globe. Technological
advancement is assistive in increasing production capacity in the worldwide market.
Threats- Competencies are higher in international market where same merchandise is available
in contrary websites with reasonable price. Inadequate innovations and technology deficiency
can hinder its productivity in economy.
Porter's Five Forces Model
Threat of new entrants or New Competitors- Globalization have helped many new retail
industries to come up which in turn leads to rise in competencies and influences the profitability
of River island, Clarks and M&S. Using the same products like the competitor's in the market
makes it hard to explore business.
Threat of Substitution- The retail industry of UK is greatly affected by this factor which requires
the introduction and innovation of goods and services that have the capacity to meet the
customer needs in a better way. The customer identifies attractive products that has reasonable
rate in market which in turn forces them to opt for low cost merchandise.
Competitive rivalry- The growth and development of retail sector are affected by competition
level increase. This rivalry rise makes the prices of products and services go down. It also affects
the profitability, operational activities and revenue of the firm (Boons and Lüdeke-Freund,
2013). These competencies hinder the growth of River Island as it may render decreased
customer loyalty and they also have several other barriers.
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Bargaining power of Suppliers- The retail companies are dependent on their suppliers who
supply goods and services to them. Supplier may sell the goods at a higher commission even if
the quality is low. This would affect the River Island’s profit as they are fetching more price for
the product in the marketplace.
For the organization to gain a better sustainability, perfect direction of negotiation by suppliers
and their likes will have a greater impact.
Bargaining power of Buyer- In the operation of an organization the main role is played by the
buyers as they are the main reason behind the generation of revenues. They need quality products
and services at reasonable prices and they bargain for that. To sustain profit margin, managing
requirements and make negotiation in a systematic way are the methods to control buyer's
bargaining ability. River Island provides their merchandise in impressive price making most of
the customer attract towards to it.
P6. Interrelation of strengths and weaknesses with external macro factors for River Island
UK's retail sector strengths and weaknesses are greatly affected by the external or macro-
environmental factors which hinders the growth and development of River Island. Political and
social factors are also important factor in identification of strength and weakness of River island,
in a way that will determine customer modest of the retail organization by helping them in the
management to sort strategically actions to fulfil competencies in supply and demand (Wheelen
and Hunger, 2011). These factors cause company's execution by government rules and policies.
The pressure from the state may increase due to several strategies and laws which may affect
River island's activities and have impact on its operational targets. Emergence of potential
consumers can be the outcome of modification in economic stability which will cause hardly on
the income generation. Strength and weakness of the company also has impact on macro and
micro factors have upon business objective and decision making at River Island. In context with
the strength firm is required to take appropriate steps so that they are able to attain competitive
advantage. On the other hand, for weakness company faces issues in relation with decision
making and change in their objectives. It is important that objectives are set as per the strength
that firm has and for weakness appropriate steps should be taken so that firm is able to achieve
their aim and objectives. Decision making is dependent on the situation that are faced by the
organization. For example, when employees of the company are not able to perform their set of
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roles and responsibilities in effective manner, then firm needs to take decisions in respect with
improving their performance level and then focus on other aspects. When workers are weak, then
it has negative impact over the business.
Economy of the nation where the business operates also a factor that can have an adverse
effect on the firm. Bank rates and raw material prices are some of the problems. These issues
will have an impact on River Island’s production due to which it must follow a proper way to
reduce this and gain competitive advantages. Technological factors influences the processes of
the organization and puts an effect on retail market of UK. Increase in digital technology and
legal factors affect River Island from judicial causes them to gain better share in market and
execute its effective operations.
CONCLUSION
From this report on business and business environment it can be concluded that the
businesses of an organization is greatly affected by its organizational structure, functional and
operational situations. After assessing the different organizations, size, function and scope it is
understood that they help in the better handling of operational activities of an enterprise. Also
discussed, internal and external factors has a major role in determining the growth and
development of River island clothing brand and its strengths and weaknesses are also included.
Porter’s five forces, SWOT Analysis and Pestle Model are taken for analysing and evaluating the
impact of macro environment on the retail sector of UK.
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REFERENCES
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