Business and the Business Environment
Purpose of this assignment
Students will examined on the different types of organisations (including for profit and not for profit), their size and scope (for instance, micro, SME, transnational and global) and how they operate.
Students will be expected to explore the relationships that organisations have with their various stakeholders and how the wider external environments influence and shape business decision-making.
(READ, CHOOSE, NARROW DOWN, DESCRIBE, EXPLAIN, ANALYSE, BE CRITICAL)
a)You will need to read various business case studies, either the ones introduced in the class or/ and read beyond this list. You will then need to choose 2 case studies, e.g. one of a public, one of a private organisation, which can also be either for profit, or non-profit. Following your choice, you will then need to develop a 10 slide presentation, with extensive slide notes (for each slide) to:
-Firstly, describe the purpose of each of the chosen organisations and then explain the main differences between their types and purposes, as well as between their size and scopes (P1, P2)
-Secondly, find, describe and analyse the link between their structure, size and scope and their offered products and services in accordance with their business objectives. (M1)
b)Following on from point a), please now choose one case study out of the two above and attempt to provide a more in-depth account (a short essay) about:
-Its various organisational functions as well to explain how these connect to the organisation’s objectives and structures. (P3)
-How the organisational structure can be impacted by the web of interrelationships between its organisational functions? When establishing these links, you will have to provide some clear examples and carefully analyse some of the advantages as well as disadvantages of this interconnectivity between organisational functions.
c)At this point, you can go all the way to achieve D1. In order to do this, you will need to record a max. 5-minute video or audio of yourself summarising and analysing both your presentation and short essay to critically recognise and highlight:
-the main differences and complexities of the two business cases in regard to their business structures
-the interconnection between different organisational functions.
(INVESTIGATE IN MORE DEPTH, DESCRIBE, IDENTIFY, EXPLAIN, ANALYSE, APPLY AND EXPRESS YOUR OPINION IN A CRITIAL WAY)
a)You will now need to investigate the chosen case study even further by looking at various recent (past year) sources of information about the organisation, e.g. news bulletins, documentaries, consumer reviews and reports, stakeholder interviews, conduct own interview, youtube clips, blog articles, academic articles etc. You will need to have at least around 1500 words worth of information about the organisation, which you will then need to actively use and reference in order to develop a report with four sections:
-Section 1: Identify some positive and negative impacts of the macro environment on the business operations. (P4)
-Section 2: Conduct an internal and external analysis to identify its core strengths and weaknesses. (P5)
-Section 3: Explain how these strengths and weaknesses are linked to the external macro factors. (P6)
-Section 4: Apply some analysis models -i.e. PESTLE and SWOT/TOWS- in order to develop an in-depth understanding of the impact of the macro environment as well as to justify how this affects organisation’s decision-making processes. (M3, M4)
b)At this point, you can go all the way to achieve D2. In order to do this, you will now need to develop a written reflective statement that would critically evaluate the main findings from your reports, i.e. mainly looking at the impact of micro and macro factors on how decisions are being made so that business objectives are ultimately met.
Success of business organisation depends on proper analysis of the external marketing environment. This is true to both profit and non profit organisations. Therefore, the current assignment tries to focus on understanding the differences between purpose, scope, size, products and services offered. Further, the assignment focuses on analysing the external and internal business environment of an organisation as well as tries identify the ways external and internal environment helps in the decision making process within the organisation.
There might be different types of organisations. It can be profit, non profit, private, sole trading, Limited and Limited Liability Company. NHS is a publicly ran company whereas another chosen company is Apple which is a privately owned global corporation. As there are differences between the types of organisations, there are fundamental differences between their operations.
The two chosen organisation are NHS and Apple. It is seen that NHS is a government organisation and therefore, the main focus is towards the benefit of the citizens whereas Apple Inc being a privately listed global corporation, the main focus is to gain benefit for itself. It is a matter of fact that based on the type of organisations, their purposes are developed and the same case is with these two firms as well.
Public companies are government ran. Therefore, in a democratic society, as the chosen government works for the best benefit of the citizens, a public company or institution also focuses for good of the citizens. NHS being a public company, its main purpose is to delivery high quality health care delivery and health care solutions for the customers. On the other hand, as Apple is a private Limited international corporation, the main purpose of the company is to increase its presence globally, especially in the markets where it does not poses high market share.
There are differences between sizes of firms as well. A national public non for profit organisation does not focus on international expansion, rather focuses on providing best benefits to the national citizens whereas the opposite is for a multinational corporation. NHS as a national organisation has been able to acquire a great status globally as the fifth largest employer all over the world. Apple Inc on the other hand seems to be unreachable by other firms. The market capitalisation and value that the firm has captured is higher than of combined capitalisation of renowned global firms. Further, it is also notable that if the total revenue is transferred into GDP, it would make up the entire GDP of a developed nation which shows the size Apple Inc has been able to reach.
Apple has the scope to maintain its competitive advantage in the market with its innovation and new product development. On the other hand, NHS has the scope to become the best national health care service provider in the globe and can become a role model for other countries for the ways; the health care system in a country can be improved.
The main objective of Apple seems to top the list when it comes to technological products and market competition. The current size of the company shows that the objective of the firm has already fulfilled as it has become the global leader in technological products. The way the company uses disruptive innovation for new product development and market penetration, it is quite sure that with the global entity, Apple will not let other firms to capture innovative technological products market.
The main link between the structure of NHS and its objectives is that as non for profit public firm, its main purpose is to provide health care services to consumers. NHS seems to be the main legislative health care authority in UK that operates the health care homes to improve their health care quality. The way it has increased to size is an indication that the firm wants to become the best and number 1 health care service provider at national level in the globe.
According to Bothaet al. (2014), there are different functional departments within an organisation that includes human resource department, finance, operations, marketing and sales. These functional departments are interconnected with each other. Ebert et al. (2014) remarked that different functional teams make up the working group and therefore, act as the primary organisational structure within an organisation. However, as far as Apple is concerned, the organisation follows a hierarchical organisational structure where most of the decisions were made by Steve Jobs own self. However, under the leadership of Tim Cook, Apple seems to follow a less hierarchical and more matrix organisational structure (Panmore.com, 2016). There are different organisational functions within the organisation that works under the matrix structure. The main objective of the firm is to provide latest products to its consumers that are not only value for money, but also are helpful in fulfilling in improving the way people live their life. The different departments mainly the human resource and innovation department focuses on developing such products that are way better than other firms.
Figure 1: Organisational structure of Apple Inc.
According to Kubaseket al. (2016), in a matrix organisation,specialist from different functional departments is assigned work for completion. It also refers to the selection of employees to a specific specialist department who report to the branch head or country head for multinational firms. Bryman and Bell(2015) is of the view that for cross functional departments to be successful, employees need to be selected in their preferred and actual department. In case of Apple Inc, selection process focuses on selecting specialists which helps in achieving the business objectives successfully. As Apple wants to improve the life of consumers easier, having a matrix structure, the different functional departments work out their task and report to the country head which then goes to the board of directors and CEO where the final decision is taken. It thus shows that different functional teams contribute to the achievement of business objectives within an organisation.
Along with the business as well as profit organisations, there are also healthcare organisations such as the NHS in the UK. The prime focus of this organisation is to serve for the service users in order to provide those necessary help to recover from their illness. As stated by Scott and Davis (2015), the management of the NHS maintains to keep focus on the health condition of the entire nation rather than focusing on achieving business profit. However, Harper (2015) has also argued in this context that the objectives and purposes of the Apple UK are completely different from that of the NHS as their concentration is on the development of their popularity along with occupying a better position in the market share of the UK mobile manufacturing industry. Therefore, the structural features of this organisation also differ from that of the NHS. Although, both the organisations have their specific target audiences, the difference lies in their aims and focuses based on their own structural aspects.
Worthington and Britton (2015) pointed out that functional departments work with each other to make or contribute to overall strategic business decision making process. For example, in order to create awareness regarding a new product, the marketing team would required the help of the advertisement team whereas the strategic decision making department requires the help of the marketing team to understand the market situation. It means that there is interrelationship between each functional department of an organisation.Hamilton and Webster(2015) remarked that in a hierarchical structure, existence of functional departments does not have to do anything as all the decisions are taken by the top management. Bryman and Bell(2015) is of the view that for functional departments to work properly, they need to be provided with autonomy of power. For example if a marketing department needs to use event advertisement for a specific product as a promotional tool, the absence of a less hierarchical structure might affect the decision. In the same way, the finance department might not be able to take the decision of distributing the resources required. Moroniet al. (2015) argued that in order to achieve businessobjectives; every functional department needs to given with autonomy so that fast decisions are made. It is helpful in solving problems when tough situations arise for a firm. However, it is also a matter of fact that providing autonomy to functional departments might lead an organisation to take faulty decisions. As far as the world largest and number 1 technological product, especially mobile phones, PC’s and ipad’s, is currently using the matrix structure where the functional departments are given autonomy of work, but not of decision making which might affect the company in the long run as most of the firms are now going for a decentralised and geographical structure that helps in managing the business units properly.
Macro environmental factors are defined as uncontrollable factors that influence business decision making process. Macro environment includes all the external environmental factors including technology, political factors, social factors, legal factors, social factors and economical factors. According to Strydom(2015), the external factors have both positive and negative impact on the operations of a firm.
An analysis of the macro environment helps a firm to identify the threats and opportunities that are present in the external market. External environment changes constantly. For example, economy of a country as well as the consumers does not remain same. In this context, an analysis of the macro environment helps a firm to identify the economical condition and thereby produce products that fits within the price range and demand of consumes. Apple Inc is a global firm and therefore, changes in global economy are supposed to impact on the operations of the firm. During 2008-09, economic recession, the demand for new products has decreased as a result of the decline in the economical situation of consumers. In the same way, the current political situation which seems to be unstable as a result of civil war in the Middle East also is about to impact on the business decisions. If the external environment is not identified, then Apple may have launched its products in the Middle East which might nothing more than a loss for the firm. Prajogo(2016) remarked that technology is changing every day. Huge number of firms is engaged in developing new products and services. Even though Apple is unaware of the technological changes, it might lead the company to lose its market position as the leading company in consumer electronic group. The analysis of external environment also helps to identify consumer choices and preferences. Thus, the main positive effect of the external environment is that of understanding consumer requirements.
External environment also has few negative effects. The understanding of external environment depends on media stories that show new technological developments, political changes or consumer preferences. Ryan and Tähtinen(2016) pointed out that false media information or media releases, false market research may lead a firm to wrong business decisions. For example in UK, many believes that due to the decision of leaving EU might have positive affect the UK economy and the legal decision for businesses whereas few believesthat it might lead to the decline of UK economy and strict regulations for business. However, the actual impact is unknown. In this context, taking decision based on any of the factors might lead affect a business. Jaakkola et al. (2016) is of the view that for understanding the external business environment, it is necessary to conduct thorough market research which requires both time and money.Krushet al. (2016) pointed out that for an international firm, the macro factors of both the home country and the operating foreign country also require consideration. Political, economical and social changes in UK might be in favour of Apple whereas it may not be in the Middle Eastern countries. Therefore, when operating business globally, these factors are about to impact on Apple and its operations.
Internal environment includes employees, suppliers, consumers, top management and government as well. Apple has more than 0.08 million (80 thousand) full time employees all over the world whereas the engaged people are more than 5 million (Statista.com, 2016). Apple employees the best human resources in the world and provides them with the facility to improve their skills. On the other hand, the company has its suppliers spread over all around the globe who provides top quality raw materials and required service to the company. Further, Apple Inc is considered as number 1 innovative company in the world due to its innovation in the area of mobile phones, tablets and ipads, Pc’s and many other consumer goods.
|Political ||UK is politically stable country though global political scenario seems to be unstable in the current scenario. It may effect on the business decisions of Apple in UK. However, the decision taken by the UK government to leave the EU has also its impact on the business of Apple (Legislation.gov.uk., 2016). Through this, the UK along with this company will no more be liable to follow the principles of EU that has created a momentary political uncertainty within the country.|
Figure 2: Operating margins of Apple UK
(Source: Legislation.gov.uk., 2016)From the statistics mentioned above, it is quite clear that the operating margin of Apple is significantly developed than that of Foxconn. Therefore, it can be stated that the functional p0erfoemnes of Apple is good.
|Economical ||UK is economically improved country with rapid growth in GDP up to 1% and per capital income over $42000 which means consumers have high buying power (Ft.com, 2016). Due to this, the capacity of the UK people is also increasing and therefore the number of the interested customers is equally growing.|
|Social||Sales performance of all apple products has increased whereas due to the increase in market share of Apple iphone, Apple Inc is currently the largest company by market capital in the globe (Macworld.co.uk, 2016). It means that consumer preference is towards the company which favours its sustainable growth in the market. With the increasing demand of the smartphones among the customers of the UK, the business policy and the functional activities are also noticeably changing.|
|Technological ||UK is technologically developed country whereas the same is with Apple Inc as well. It means that the company has access to high quality transportation, logistic system and promotional tactics that can be applied in UK to gain competitive advantage in this market. With the advancement of a number of technological approaches and their implementation in the handsets, the satisfaction level of the customers is improving (Ebert et al. 2014). On the other hand, it is a fact that there are some special features in the smartphones of Apple that are attractive for the consumers.|
|Legal ||UK has strict regulations, more specifically every organisation has to face legal rules for doing business in UK (Legislation.gov.uk, 2016). The taxation system in UK seems to be appropriate for the competitive growth of Apple. Similarly, through the application of regulations related to manufacturing sectors, the management of Apple is bound to operate their functions legally (Apple.com, 2016).|
|Environmental ||Apple does not seem to follow any type of sustainability and therefore, there is a huge concern regarding the environmental factor. However, currently, Apple Inc has introduced recycling of its products for environmental sustainability even though there is more environmental sustainability initiatives are required by the firm. Therefore, through this, the management of Apple can able to fulfil the environmental requirements.|
Table 1: PESTTLE analysis
(Source:Jaakkola et al. 2016, p.147)
Table 2: SWOT analysis
(Source: Apple.com, 2016)
Apple seems to be the most innovative company with the best in class products. However, there is lack of availability of the products in the range of consumers. However, the company can gain competitive advantage in the UK market by decreasing its price little bit lower while keeping the product quality.
It is identified that increased demand of Apple’s products, especiallyiphone all around the globe has a huge impact on external factors.Consumers’choices seem to be in favour of Apple’s products as its products are easy to use and value for money. On the other hand, being the largest company in terms of revenue, it seeks to challenge the legal factors, especially the taxation system implement by many countries. Apple has the capability to offer products as per the economical condition of consumers in different markets and thereby influence the social decision. As far as technological factor is concerned, it is identified that Apple Inc has the most advanced R&D team that is engaged in discovering new technologies every now and then which impacts on the business decision of firms (Apple.com, 2016). Even though a country is not developed in terms of technology, Apple can help in establishing manufacturing outlets that can impact on the technological factor. Apple does not seem to be responsible at all towards the environment and the society. Therefore, there are requirements to develop products that can help in gaining environmental sustainability.
Further, it is identified that Apple seems to face competition from companies like Samsung, Lenovo and HTC in the smart phone segment, especially in terms of price ranges. The products available for consumers from Samsung and other mobile phone developers with the same features are of half price than that of from Apple. This seems to impact on consumer choices and preferences as modern consumers are price sensitive in nature.
From the above analysis of analytical tools PESTLE, Porter’s Five Forces and SWOT, it is identified; these tools are helpful in understanding the external threats and opportunities, strengths and weakness of a firm. As a firm understands own strength and weakness, it can take measures and strategies to improve the situation. On the other hand, as potential opportunities are identified, it can also curb the threats in the external environment by improving its core competencies (Skarmeaset al. 2016). From the above analysis, it is identified that most of the macro factors in the context of UK is in favour of Apple to gain sustainable economical growth. In this context, the company can take the decision of investing more in promotion in the UK market. In the same way, if the market research identifies the Asian market as more profitable and less risky, then the shift may be given towards the Asian market. Thus, it becomes clear that macro external environment influence a market in taking its business decisions, especially entering or exiting a market, increasing or decreasing product price, implementing new or traditional or aggressive promotional strategies.
I have identified the importance of both internal and external environmental factors. From the analysis, the most important factor that I have recognised is that business decision making in a product market depends on both the internal and external business environment.
I have to understand that if a firm does not have the required human resource, even after having other resources like, it might not be possible to execute the business strategies whether it is innovation, product development, marketing and sales or management of finance. Having skilled human resource would benefit the firm in competing with other firms in the product market. I have also come to understand the importance of supplier market in a multinational corporation, especially a mobile phone and PC producer like Apple. Apple has its manufacturing bases in China and other developing countries. If they stop providing the raw materials for making the products, Apple will need to for other strategies to gain the revenue it is currently gaining as a market leader in the smart phone market. I have also understood that the entire internal environment is about the engaged stakeholders. The leadership and the management is also liable for decision making within an organisation. For Apple, this is more specifically applicable as decisions are made on more hierarchical level than any other firm in the industry apple operates. Thus, if there is good supplier base, highly skilled and enough human resource and good leadership attributes, a firm can take any challenge as Apple has done and is doing in the current situation as well.
The most important thing about the external business environment I have found is that every factor is related with each other and contributes to original decision making process within an organisation. An organisation cannot ignore the competition in the market as well as the strategies deployed by other firms to make a counter strategy. On the other hand, if the political situation is not stable whereas legal rules are not in favour for sustainable growth, a firm can withdraw from a market and in a favourable situation, a firm can enter into a new market as well. The same is the case with economic situation. Buying power of consumers is dependent on the economical situation of a country or a region. I have come to know that if the economical situation of a country is improved, a firm can go with high priced strategy whereas if the economical condition is not up to the market, a firm needs to go with low priced or value for money product strategy. It has also become clear to me that in the absence of a good technologically developed market, a firm can face a huge number of difficulties not only in supply chain, but also in advertisement. Consumer choice seems to be most the important factor to me as based on the current buying trends, organisations make their marketing mix strategies and segmentation, targeting and positioning strategies. Thus, it can be concluded that business decision making of firms is to high extend is dependent on the analysis of the external and internal environmental and the findings in term of opportunities and threats
From the above analysis, it becomes clear that there are different types of organisations as well as different types of organisational structure. The selection and persuasion of organisational structure is influenced by the different functional teams within a firm. On the other hand, it also become clear that within an organisational context, external and internal environmental factors influence the business decision making process as it helps in the identification of potential threats and opportunities in the external market environment of a firm. Further, it also becomes clear that the external business environment helps a firm to make its business strategies to gain competitive advantage in a new or existing market.