BUSINESS AND THE BUSINESS ENVIRONMENT

Organizational types, structures, functions and the Business

Environment
Contents
Introduction: .................................................................................................................................... 5

LO1: ................................................................................................................................................ 5

DIFFERENT TYPES, SIZE AN SCOPE OF ORGANIZATIONS: .............................................. 5

TYPES OF BUSINESS ORGANIZATIONS:................................................................................ 5

PUBLIC ORGANISATIONS ..................................................................................................... 6

PRIVATE ORGANIZATIONS .................................................................................................. 6

VOLUNTARY ORGANIZATIONS .......................................................................................... 7

SIZE OF BUSINESS ORGANIZATIONS: ................................................................................... 7

Large Sized Business Organizations ........................................................................................... 8

Small Sized Business Organizations ........................................................................................... 8

Medium-sized Business Organizations ....................................................................................... 8

SCOPE OF BUSINESS ORGANIZATIONS: ............................................................................... 8

DIFFERENCE OF SIZE: ............................................................................................................ 9

OBECTIVES AND GOALS: ...................................................................................................... 9

MARKET SHARE: ..................................................................................................................... 9

GROWTH AND SUSTAINABILITY ........................................................................................ 9

COMPETITION: ........................................................................Error! Bookmark not defined.

LEGAL STRUCTURE OF BUINESS ORGANIZATIONS: ....Error! Bookmark not defined.

LO2: ...............................................................................................Error! Bookmark not defined.

INTERRELATIONSHIPS OF THE VARIOUS FUNCTIONS WITHIN AN ORGANISATIONS

AND HOW THEY LINK TO ORGANIZATIONAL STRUCTURE ......... Error! Bookmark not
defined.

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FUNCTIONS WITHIN AN ORGANIZATION: ..........................Error! Bookmark not defined.

Role of Marketing ...................................................................Error! Bookmark not defined.

Role of Finance .......................................................................Error! Bookmark not defined.

Role of Human Resource ........................................................Error! Bookmark not defined.

Role of Operations and research .............................................Error! Bookmark not defined.

MAJOR STRUCTURES OF BUSINESS ORGANIZATIONS: ...Error! Bookmark not defined.

Functional Structure ...............................................................Error! Bookmark not defined.

Divisional Structure....................................................................Error! Bookmark not defined.

Matrix Structure .........................................................................Error! Bookmark not defined.

LO3: ...............................................................................................Error! Bookmark not defined.

POSITIVE AND NEGATIVE INFLUENCE THE MACRO ENVIRONMENT ON BUSINESS

OPERATIONS ...............................................................................Error! Bookmark not defined.

PESTEL FRAMEORK OF ORGANIZATION .........................Error! Bookmark not defined.

Political Factors ..........................................................................Error! Bookmark not defined.

Economic Factors .......................................................................Error! Bookmark not defined.

Social Factors .............................................................................Error! Bookmark not defined.

Technological Factors ................................................................Error! Bookmark not defined.

Environmental Factors ...................................................................Error! Bookmark not defined.

Legal Factors ..............................................................................Error! Bookmark not defined.

LO4: ...............................................................................................Error! Bookmark not defined.

INTERNAL STRENGHTS AN WEAKNESSES OF ANY SPECIFIC BUSINESS AND

EXPLAIN THEIR INTERRELATIONSHIP WITH EXTERNAL MACRO FACTORS .... Error!
Bookmark not defined.

Internal Strengths of Business:...................................................Error! Bookmark not defined.

Internal Weaknesses of Business .............................................................................................. 17

External Opportunities of Business: .......................................................................................... 17

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 External Threats of Business: .................................................................................................... 17

INTERRELATIONSHIP WITH EXTERNAL MACRO FACTORS .......................................... 18

Political Factors and legal factors ............................................................................................. 18

Economic Factors ...................................................................................................................... 18

Social Factors ............................................................................................................................ 18

Technological Factors ..............................................................Error! Bookmark not defined.9

Environmental Factors ...............................................................Error! Bookmark not defined.

CONCLUSION: .............................................................................Error! Bookmark not defined.

References ..................................................................................................................................... 19

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Introduction:

Organizations are established and commenced with the motive to earn profit, to provide goods
and services to general public satisfying their needs and wants and more importantly these
organizations are beneficial to the economy of the specific country. Business organizations are
supposed to monitor, lead, and control, and manage all business activities for better growth and
enhancement of market share.

Business environment plays significant role for healthy business and business activities to excel
in the market. Every single business is working for profit, expansion and growth. Therefore,
environmental conditions: internal as well as external are first priority to maintain and sustain
position in the market.

LO1:

DIFFERENT TYPES, SIZE AN SCOPE OF ORGANIZATIONS

Business organizations work for their individual growth, market growth and national market
growth in international market for global expansion. But this advancement requires hard work
and unity of different functions and operations. There are three basic types of organizations and
size working in business environment in the market. (ECGI, 2015).

TYPES OF BUSINESS ORGANIZATIONS:

Below mentioned are the basic types of organizations:
 Public Organizations
 Private Organizations
 Voluntary Organizations

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 Private

Public

Voluntary

PRIVATE ORGANIZATIONS
Private organizations are those who sell their shares to general public to enhance their
business capital and they work with more resources and effectively. Private owners in the
form of shareholders invest in the business companies with their investment and receive
dividend in return. Higher capital also returns higher profits. In private companies, all
functions and departments are owned, organized, controlled and managed by the directors
of the company and directors are headed with a president as top executive member of the
business organizations. Adidas, Nike, PEPSI, MacDonald’s are all privately owned
business organizations. (Morgan, 2015)

PUBLIC ORGANISATIONS
Public limited companies are owned and controlled by government itself rather than
private bodies as shareholders. Government manages all functions and departments
working with business organizations. Government bodies are limited to the shares
purchased and owned. These business organizations are established with a motive to
serve general public. Business environment is maintained to excel and grow in the market
with its separate entity and perpetual identity. Government or public business
organizations are for welfare of general public but profit and loss is shared within the
limit shares purchased. (Morgan, 2015).

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VOLUNTARY ORGANIZATIONS
In the market, number of market share is possessed by private companies, public business
organizations and also by voluntary organizations. Voluntary organizations are those
working with a vision to serve the society with motive to provide services for welfare
purposes. These organizations serve as NGO and focuses on issues faced by general
public from society and environment. These organizations are also composed of various
business functions and departments which are managed voluntary. UNESEF and
UNESCO are serving as voluntary organizations. (Morgan, 2015).

SIZE OF BUSINESS ORGANIZATIONS:

Small Sized

Business
Medium Sized
Organizations

Large Sized

Small Sized Business Organizations

Small sized business organizations are generally sole proprietorship with singe owner
who is all in one. The same single owner dealing all business activities, earn profit, share
loss and are liable to pay all liabilities. He is manager, organizing and managing all
business functions and control business environment, internal as well as external like
local brands.

Medium-sized Business Organizations

These business organizations are medium in size with minimum 2 members and 50 at
maximum. These are generally partnership organizations with shares in ratio to their
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 investment to establish business. They are sharing unlimited liability and receive
dividend to the same ratio of investment like brands serving at national level. (Clark,
2000).

Large Sized Business Organizations

Large sized business organizations are those with minimum 5 members as shareholders
or partners and maximum at large. These large scaled organizations sell its shares to
general public and requirepublic to invest. In return to their investment, companies share
profits and losses to the amount shares purchased. Liability is also limited to shares
purchased. Large companies have large departments and various functional areas like
Unilever serving as international brand.

SCOPE OF BUSINESS ORGANIZATIONS:

Business organizations are serving in the market environment with their own significant value
and scope. Below significant roles are mentioned creating differences:

DIFFERENCE OF SIZE:
Size of business organizations matters a lot. Small sized business organizations are
entrepreneurship while partnership is one with medium sized. High quality products and
higher market share is gained by Joint stock companies. Nestle is serving as global brand
as a large company.

OBECTIVES AND GOALS:

Business objectives and goals of the company are significant. Their goals define their
vision. Like few organizations are quality oriented whereas few are those with productsof
higher quality but charging high cost is not affordable. NIKE is serving as trustworthy
brand in terms of quality and pricing. (Argyris, 2017)

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MARKET SHARE:
Market share designate the significance of the business organization. Companies with
large market share are beneficial to the economy, general public and global market like
Coca Cola serving as global brand with higher market share in beverages.

GROWTH AND SUSTAINABILITY:

Our target market is upper and middle class, youth and families in Sargodha. In this area
numbers of schools, colleges, university and hostels are working so we have target youth
(students) especially and families as it is residential area.

Company’s goal is to become a leading brand through getting maximum customer

satisfaction and efficiency in this field. Objectives are to attract customers, get largest
market share in the market, make them loyal to our brand and increase sales to grow.
(Drucker, 2017)

COMPETITION:
Competition is the ability to compete in the fast and global environment is of great
importance as the survival of the fittest being the name of the game. The competition has
even become ever tough, swift and challenging with the entry of many foreign world-
class banks and other financial institutions.

GLOBAL GROWTH:
As these days the world has been turned into a global village, living without awareness of
the incidents taking place around him, one cannot survive well. Every single business
organization is in desire to serve as global brand like Vaseline and KFC working in
international market. (Hillary, 2017).

LEGAL STRUCTURE OF BUINESS ORGANIZATIONS:

In many countries unincorporated associations are working which do not have separate legal
entity or personality. Public sector organizations are legally State Owned Organizations with
three levels of local, federal and regional. Paid up capital in legal terms also define legal
structure as large or small organization. Legal environment consists of business laws,
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government policies agencies, and pressure groups that influence various organizations and
individuals. Generally all theselaws create new business opportunities in market of international
level. (Druker, 2017).

LO2:

INTERRELATIONSHIPS OF THE VARIOUS FUNCTIONS WITHIN AN

ORGANISATIONS AND HOW THEY LINK TO ORGANIZATIONAL STRUCTURE
Departments are functioning as per business activities and scope of the business. Various
functions like finance, marketing, human management and promotional activities are interlinked
with one another. (Baligh and Burton., 2014).

FUNCTIONS WITHIN AN ORGATION:

Role of Finance
Cost and pricing are integral parts of finance department. All financial activities
are controlled and managed by this department. Financial decisions are taken by
higher authorities as per finances available. Revenues and dividends are divided
by finance department. They also focus on the employees. They consider the
employees as the main asset of the company providing the better facilities in
financial perspective.

Role of Human Resource

Leadership/ managing, controlling/ organizing and analyzing staff must be
equipped with modern tools and must be taught modern techniques. The main
objective of HR department is to meet company needs of the human resource and
the needs of the employees hired by the company. The management of the
business organizations considers that in order to stay competitive and to meet
needs of the customer. They also focus on the employees. They consider the
employees as the main asset of the company providing the better facilities.

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Role of Operations and research
The purpose of market research is getting information about market, consumer
and competitors. Primary sources of information are observations, interviews and
questionnaire and also feedback from employees and customers. The secondary
source of information is internet.They also focus on the employees. They consider
the employees of the business organizations as the main asset of the company
providing the better facilities and services to their department and operational
strategies are managed accordingly. Research is linked with financial department
as expenditures are managed by this department for research and operational
purposes.

Role of Marketing
Business organizations are adopting customer oriented marketing strategies to
attract customers as much as one can. Companies follow differentiation strategy
because such strategy emphasizes a product that is unique in the industry and
provides distinct advantage to the customers.Quality oriented business
organizations follow promotional and advertising techniques. Marketing is
interlinked with financial because expenses of marketing activities are planned by
finance department.

MAJOR STRUCTURES OF BUSINESS ORGANIZATIONS:

Major structures of business organizations include:
 Functional Structure
 Divisional Structure
 Matrix Structure

Functional Structure
Various functional structures within business organizations are working under a head. Like
below mentioned graph depicts functional structure. Headquarters here means a head upper
than functions and departments of business organization. All functions of business are

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 separated and segregated into departments where reporting is done to managers and
managers are responsible to report to higher levels of hierarchy.

Divisional Structure
Divisional structures are those in which a managing director is playing vital and lead
different sectors playing vital role. For this structure every product line of concerned business
has their separate functional group which allows business personnel to carry all essentials
functions out. In this tye of structure, employees performing same task in his specific
functional department ends up with ambiguities and inefficiency. This not only doubles the
function but also management systems, policies for development and many other activities
are duplicated. Chain of command in this divisional structure is double making employees
inefficient.

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Matrix Structure
Matrix structure is a kind of structure in which numbers of Projects are assigned to each
employee within particular functional area. Employees work under different managers and
teams. Such teams are made with other functional departments as well. And these functions
are alsokept on changing with the changing needs and requirements of organizational
functions. Graph explains easily about matrix structure. (Robbins and Sanghi, 2007).

LO3:

POSITIVE AND NEGATIVE INFLUENCE THE MACRO ENVIRONMENT ON

BUSINESS OPERATIONS

PESTLE FRAMEORK OF ORGANIZATION:

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 Social Technological

Economic Legal

Political PESTLE Enivironmental

Political Factors
Political factors are how and to what degree a government is playing an influential role in
the economy. Specifically, political factors include the areas such as tax policy, labor and
labor law, environmental law, trade regulations and restrictions, tariffs and tariff items,
along with political stability. For business organizations, political factors spots deep
effects.

Economic Factors
Economic factors include economic growth, interest rates, exchange rates and the
inflation rate. These factors have major impacts on how business organizations operate
and make decisions for business. For example, interest rates affect a firm's cost of capital
and therefore to what extent a business grows and expands.

Social Factors
Social factors include the cultural aspects and include health consciousness, population
growth rate, age distribution, career attitudes and emphasis on safety. These factors are
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 vital for business organizations as businesses also work on social strategies and friendly
environment.

Technological Factors
Technological factors include ecological and environmental aspects, such as
R&Dactivity, automation, technology incentives and the rate of technological change.
Lack of technology and equipments is also one of the major issues for the aforesaid
statement. Staff must be equipped with modern tools, advanced methodology and must be
taught modern techniques to grow and expand business at great.

Legal Factors
Legal environment consists of rules and laws, government agencies, and pressure groups
that influence various organizations and individuals. Sometimes these
laws create new business opportunities.Legal factors include discrimination law,
consumer law, antitrust law, employment law, and health and safety law. Legal matters
also effects operations of business organizations to some extent.

Environmental Factors
Environmental factors include natural conditions of atmosphere like weather, climate,
and climatic changes, which may especially affect industries such as tourism, farming,
and insurance. Environment also affectsorganizations and organizational environment in
some way frequently.

Organizations working in various markets are greatly influenced by all these factors and they
survive and serve within these situations, controlling them and stabilizing them. these elements
are significant to business organizations and fluctuations are managed accordingly.

LO4:

INTERNAL STRENGHTS AN WEAKNESSES OF ANY SPECIFIC BUSINESS AND

EXPLAIN THEIR INTERRELATIONSHIP WITH EXTERNAL MACRO FACTORS

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The overall evaluation of a company’s strengths, weaknesses, opportunities, and threats is called
SWOT analysis. It’s a way of monitoring the external and internal marketing environment.

Strengths Weaknesses

Opportunities Threats

Internal Strengths of Business:

Many business organizations are effected from legal changes, political instability, economical
fluctuations and environmental changes to some extent. Strengths include all key positive points
which are uniqueness and advantages a specific brand possess to make it different from others.
And strengths are vital in external market and internal environment of organization. In external
environment strengths are influential. If a company possessesstrengthit not only benefits the
organization but also to economy of the country, also it is beneficial to society. Economy
benefits the government and political stability can also be maintain in one or other.

Internal Weaknesses of Business:

Weaknesses are basically shortages, lacking and area of improvement of business organization in
which missing factors are focused to remove to avoid loss. Weaknesses are sometimes become
great source for organizations to wind up. Weaknesses in organizations can be of various types
like in staff, customer services, production, operations, market research and products as well.

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Like many companies do not pay heed to market research and projections which give chance to
other companies to grow with research and feedback. Many companies are unable to gain market
share in economy. Many companies are effected greatly or small extent from legal changes,
political instability, economical fluctuations and environmental changes.

External Opportunities of Business:

A chance to grow and expand is termed as opportunity for business organizations. Opportunities
can be lacking of any other company working in the same market or it can also be strength which
can prove to be advantage of other. Opportunities also effects economy and market share of that
market to great extent. Many legal changes and amendments in policies become a chance to
grow in global market. Opportunities can also be availed in political instability and new
regulations in environmental factors.

External Threats of Business:

Threats are the changes occurring in the economy, politics, legal laws, social values and
environment as well as in other business organizations in the market, most importantly in
competitors. Competitors are great source to learn and grow. These organizations are keen in
market research and markets know how. Technological advancement in the market organizations
can be a threat to those who are outdated in operational, production, and research techniques.
And if organization facing threat is slow to adapt these changes then it can be difficult to excel
and grow in the market for long. A small change in focus of a large competitor organization
might wipe out any market position we achieve. Threats from all such areas and macro
environmental resources may prove to be an opportunity of may remain threat to that company.

INTERRELATIONSHIP WITH EXTERNAL MACRO FACTORS

SWOT analysis greatly affects external macro environmental factors. Belo explained are macro
factors interrelating with strengths, weaknesses, opportunities and threats of any specific
business organization:

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Economic Factors
Economy and economic indicators affect the organizational strengths, weaknesses,
threats and opportunities it comes up to. Strengths allow organizations to respond to
economic changes. Weaknesses sometimes become source of loss and deficit because
weak areas within organization prove to be unable to meet the changes. Adaptation is
necessary to make things happen for organization. Opportunities can be availed when
economic factors are within the strengths of the organization. Like labor laws can be
adopted and adapted if human resources are managed properly. (Goodstein and Polasky,
2005)

Social Factors
Society is major source for organization to know its strengths, weaknesses, threats and
opportunities. Social changes help companies to know their capacity and adaptation
ability. If social activities, social values and social priority changes then organizations
change their service style accordingly. Creative development ideas may only work if
change is accepted. Customers are these days conscious with the ingredients in the
products; halal contents are preferred due to awareness. So, companies have to make
arrangements accordingly within their strategically managed region.

Political Factors and legal factors

Political and legal changes may also influence the strengths, weaknesses, threats and
opportunities. Legal environment consists of all policies and legal business laws,
government policies and agencies, and pressure groups within business organization and
outside that influence various organizations and individuals. Sometimes these laws create
new business opportunities. Due to political instability taxes and excise duties are
enhanced then it may be threat to global and international organizations. (Mosco, 2014).

Technological Factors
Technological advancements are great threat to many organizations as technical
development is highly debated and researched topic. These technological changes are
strengths to many organizations on other hand. The consultancy might therefore decide
to specialize in swift response, good value services to local businesses. To get the greatest
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 possible market presence for a set advertising budget it is mandatory to adapt. The
consultancy should keep up to date with changes in technology where possible.

Environmental Factors
Environmental changes and ups and downs many proves to be great barrier in the
advancement and growth of few business organizations. Companies working in high
tempered environment are unable to initiate projects which require production in low
temperature areas. Likewise moist temperature is unable to establish those businesses
which can become source of loss. Strengths in areas of environmental changes can be
best; if not then it is threat to it. (Stirling, 2008).

CONCLUSION:
Business is initiated with a vision to satisfy specific area and to earn profit. Business
environments within organization is managed and controlled by higher management with healthy
decisions and strategies. While external environment, is not in control of internal management.
External environment is influenced by many forces of Politics, Economy, Society, Technology,
Environment and laws. Business environment plays significant role for healthy business and
business activities to excel in the market. Various functions like finance, marketing, human
management and promotional activities are interlinked with one another and are mandatory to
influence market. Analysis of strengths, weaknesses, opportunities and threats is a way of
monitoring the external and internal marketing environment.

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