Qualification - Higher National Diploma in Business
Unit Name - Business and the Business Environment
Unit Number - Unit 1
Unit Level - Level 5
Assignment Title - The Business Environment of a Multinational Organisation
Learning Outcome 1: Explain the different types, size and scope of organisations.
Learning Outcome 2: Demonstrate the interrelationship of the various functions within an organisation and how they link to organisational structure.
Learning Outcome 3: Use contemporary examples to demonstrate both the positive and negative influence/impact the macro environment has on business operations.
Learning Outcome 4: Determine the internal strengths and weaknesses of specific businesses and explain their interrelationship with external macro factors.
You are required to investigate and explain three different types of organisations, their size and classification to highlight differences between them. This should include their legal structure, size and scope, as well as their key stakeholders. For one of the organisations you must then explain the various functions within the business and create an organisational chart to explain the interrelationships between different functions. You must also explain how this would be different in the other two organisations. You are required to analyse the current environmental factors that influence/impact your chosen organisation.
This will be presented as a report to the CEO and should include the following:
1. Introduction to provide an overview of different types of organisations and the growth of the international business environment.
Business organisations are typically run by one or more individuals and they are usually aimed at generating a steady stream of revenue. This report analyses the size, scope and structure of business organisations and how the external and internal environments of the businesses can shape their objectives and decision-making processes.
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LO1: Different types, size and scope of organisations
P1: Types and purposes of different kinds of organisations
There are usually three kinds of organisations - private, public and voluntary. These classifications are usually based on the kind of services or products they provide, along with the legal structures they have.
Public sector organisation:These business organisations seek to fulfil the specific needs of the public at large, and thus their primary aim is not exactly to generate profits but to meet the demands and requirements of the target consumers. Such organisations are usually run with the help of government funds, and are often crucial to the success of the economy of any country (Link and Scott, 2019). One of the best examples in case of a public sector organisation would be the BBC or the British Broadcasting Corporation, with the viewers and the government being its primary stakeholders.
Private sector organisation:These businesses are typically owned by individuals or groups of individuals, and they operate with the aim of generating profits in exchange of the services and products they provide to the customers (S. Rashid and U. Rashid, 2012). The welfare of the shareholders and investors, along with the consumers, are of primary importance for such businesses. These organisations run with the help of funds from bank loans and from the investors. Private businesses usually have a number of legal structures, such as the sole proprietorship, partnership, private limited, and large companies. Sole proprietors or traders are those individuals who singularly own the businesses (Singh, Chaudhary and Arora, 2014; Permwanichagun, et al., 2014). Partnerships usually involve two or more people who share the profits and losses equally while also being responsible for the ownership and management of the company. Private limited companies generally have more than one director, and can be either small or a medium-sized enterprise (Birds, 2014). Large or multinational companies are also a part of the private sector organisations, such as Tesco PLC, which is the largest supermarket retail chain in the UK.
Voluntary organisation:These organisations are often referred to as non-profit companies, since they are run with the intent of benefitting the society and not for incurring profits, much like the public sector companies (Wo, Hipp and Boessen, 2016). These organisations are run independently even though they might rely on government funding for their operations. A major portion of their funds are also drawn in through donations. One of the most well-known, global voluntary organisations is Oxfam, which operates internationally through the help of many local and regional NGOs. Also, non-profits can often be run as cooperatives as well, with six or more people as the owners of the business.
Growth of the international business environment:The international business environment has been growing at an unprecedented rate due to globalisation, and this can be attributed to numerous factors such as the advancements in technology, communication and foreign exchange markets due to gigantic changes in the political systems worldwide. Thus, the international business environment is becoming increasing diverse in its nature, which has also spiralled forth the growth of many new companies across all the three sectors as identified above. This has consequently enabled many countries to develop their economy, ultimately enabling the people to have access to better resources as well as an improved quality of life (Burlacu, Gutu and Matei, 2018).
2. An explanation of each of the chosen organisations, including: background details of the organisation; the products and services they supply; the size and scope of the organisation; their vision, mission and business objectives; the organisational and legal structure; and information about their stakeholders.
P2: Size and scope of different kinds of organisations
The three kinds of organisations as mentioned in the previous section all differ from each other on the basis of their size, scope and business objectives, thus, making it necessary for them to have different missions, visions and goals. This section will discuss the size of the organisations along with their scope and background.
BBC:The British Broadcasting Corporation is the largest news broadcaster in the world, and its viewership extends to over 56 million people in the UK alone (Johnson, 2019). The mission of the company is to make sure that the people can have access to a reliable source of news that they can trust, while also being creative in their approach to ensure that the very same viewers can express their views freely. The vision of the company is to have a world where everybody is health, resilient and empowered as a community while also being diverse and well-informed (BBC, 2020). Thus, the company's scope is to act as the agent that empowers the people and makes them aware of what is happening around them on a global scale.This organisation's primary service is of providing quality news and television programmes to its viewers, and the UK government is the main stakeholder.
Tesco PLC:This organisation is the largest private sector employer in the country, and has over 3,400 stores. According to a report by Statista, the annual revenue of Tesco PLC was as high as 52 billion pounds (Wunsch, 2019). The company's mission is to be able to serve the customers better with every passing day in order to be a champion for them (Tesco PLC, 2020a). The vision of the organisation is to become a valuable entity for the customers with the help of their employees who can inspire others through their commitment and loyalty. The scope of the organisation is to make sure that their consumers have access to the best possible products and services while incurring the necessary profits for running the business.The company sells many products such as groceries, clothing, and other everyday essentials. The main stakeholders are the customers, the investors and the employees.
Oxfam:This organisation functions as a cooperative or a collaboration of around 20 non-governmental entities, and it works to help improve the living standards of the people all around the world. The mission of the organisation is to give way to a world where the people would have easy solutions for solving the issue of poverty, which would help them attain freedom and empowerment. The company's vision is to have a future where there is no poverty in the world, and the people can enjoy their basic rights without any unfair boundaries or limitations (Oxfam, 2020). The scope of this non-profit organisation is to make sure that the people on a global scale can have the opportunity to lead a dignified life devoid of poverty, hunger and discrimination, thereby making the society an overall better place to live in.The primary stakeholders are the volunteers and the governments where the company operates.
3. In detail, explain the functions for one of the chosen organisations, using an organisation chart to show how the functions interrelate and an explanation of how they relate to structure.
M1: Link between organisational structure and business objectives
The size, structure and scope of all business organisations always are interlinked with their objectives and the goods or services they cater to. The organisational structure is majorly dependent on the various business functions that ensue, and this should also be in compliance with the type of products or services they provide. The business goals and objectives are also majorly dependent on the scope and size of the companies, since these elements determine the employee strength as well as their skill level when it comes to the functions and responsibilities that they have to fulfil.
Business organisations with varying legal structures are also prone to have varying scopes and business objectives. For instance, a sole proprietor such as the owner of a hair salon provides a service and expects a fee in return, which also implies that this owner shall be shaping their business in such a manner as to attract the intended target consumers and also retain them in the long run. Also, when there is a high amount of competitive rivalry, the business objective of survival takes the precedence, and businesses work in order to maximise their profits as well. In such a situation, the private sector companies would frame their business goals in such a manner as to prioritise survival and profitability. On the other hand, if the market conditions are favourable enough, the priority would be to increase the market share by increasing the sales volumes, which would once again help with the profitability.
Furthermore, as can be said in the case of Tesco PLC, the business objective is to generate profits while also serving the customers in the best possible manner in a bid to retain the topmost market position. This has prompted the organisation to design and allocate its workforce in such a manner as to make it easier to enable a better quality of customer service. Moreover, the large size and financial capabilities of the retail organisation also allow them to restock their inventory as per the market demands and trends, thereby making it easier for them to meet the intended objectives.This organisation has a global size and its scope is therefore to help as many people as possible. Because of this, its structure is flat, with the members having roles that are not at all strictly defined since it is not possible to carry out social work if the organisational leadership and structure is autocratic and hierarchical. This has thus allowed Oxfam to serve the communities better. Also, in the case of BBC, its global size calls for the strict management of its business processes, and the fact that is service is primarily in the form of news and television shows, it also requires a strict regulation at all levels. Similarly, Tesco PLC's business objectives, as already pointed out, are aimed at serving the best to the customers, and this is facilitated through its low-cost strategy.
LO2: Interrelationship of the various functions and link to organisational structure
P3: Relationship between organisational functions and objectives and structure
The organisational functions are influenced by the structure and the business objectives of companies, which is proof of the assumption that there exists an interrelationship between them. The organisation chart of businesses often come in handy when exploring this avenue, as explained below.
As deduced from the above image, the company follows a hierarchical structure which is traditionally referred to as a tall organisational structure. The CEO is the one who oversees all the operations and the department supervisors and group directors are responsible for reporting to him. All the different teams such as the digital media, finance, human resources and global TV are liable to be answerable to the CEO.
As understood from the organisation chart above, Tesco PLC has a wide array of regional managers who are in charge of the outlets under their jurisdiction, which are in turned by the store managers independently. The junior managers are those working under the store managers, and they are responsible for ensuring that the shelves of various aisles are always stocked.
The three main functions that can be described for Tesco PLC here are the marketing, purchasing and the human resources functions. The human resources department is responsible for the recruiting and appointment of the employees who are then delegated to positions in the marketing and the purchase departments. These very employees form the backbone of the organisation as the purchase department keeps track of the inventory movement and ensures that the shelves are always stocked. On the other hand, the marketing team works incessantly to ensure that the brand is being promoted among the target consumers based on the products that are being sold. Thus, there is always an interrelationship that controls the functions of organisations, and the same can be observed in the case of Tesco PLC.
At Oxfam, the organisational structure is quite flat as can be understood from the figure above, and this makes sense because it is a voluntary organisation and thus has the requirement of allowing the managers and the supervisors exercise some relaxation on their part to encourage and motivate the volunteers. The managers at the organisation are also in charge of the various tasks such as publications and fundraising.
Thus, as can be inferred from the analysis above, the structures of the organisations are ultimately a result of their business goals and objectives. Tesco PLC and BBC have relatively taller structures due to the nature of the services they provide, while Oxfam has a much flatter structure as it does not have the need to exercise a strict control over its processes but instead allow room for the functioning of the volunteers and managers (Jones, 2013).
M2: Advantages and disadvantages of the interrelationships
Like most elements, the interrelationship of the organisational structure and the functions has its own set of benefits and limitations. In case of the advantages or the benefits, it helps with improving the competence level of the employees who are working in a specific department or wing. Thus, this makes it easier to achieve an improved level of specialisation in terms of the work that has to be fulfilled, as the managers and supervisors are always present to guide them accordingly. Thus, the pace of the business processes also consequently improves due to the availability of the necessary manpower and relevant skills (Jones, 2013). Thus, the many functions and processes of the business organisations can be approached with improved clarity, and can be upgraded easily.
However, there can also be said to be certain limitations to this interrelationship between the structure and the functions of business organisations. For instance, the collective achievement or fulfilment of the business objectives becomes a major challenge due to the many divisions and groups that the employees are categorised into.This issue arises primarily due to the differences in the techniques and the pace that are adopted to fulfil the required work. Thus, this can be understood as a major hindrance to the progress of the business, since the objectives cannot be met at the same time, thereby causing the issue of a low motivation among the workers (Jones, 2013). This is true mostly for hierarchical organisations such as BBC and Tesco PLC, which can thus gravely affect the success of the companies in the long run.
However, this same organisational structure benefits them because of the size of the companies, since they are spread on a national as well as a global scale. The services and the products they provide call for the need to be managed and regulated strictly, while Oxfam being a non-profit organisation benefits from its flat structure as it allows the managers, the employees, and the volunteers to be creative in their approach to finding solutions for the global problems. Thus, this alternative works perfectly for Oxfam while it could easily have given rise to a management disaster for a larger company like BBC or Tesco PLC.
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4. Use contemporary examples to demonstrate both the positive and negative influence/impact the macro environment has on business operations.
LO3: Demonstration of positive and negative impact of macroenvironment
P4: Positive and negative influences of macro environment
The external environment surrounding any organisation has the potential to significantly impact the economic and other aspects of the business processes, and this impact can either be positive or negative. Furthermore, the wave of globalisation that has hit most countries including the UK has affected the macro environment further, making it necessary for the organisations like Tesco PLC to keep track of these developments since they have the power to impact their actions and processes (Cwalina, Falkowski and Newman, 2012). Thus, organisations need to have appropriate strategies as well for dealing with these many changes, since it is necessary to tackle the external changes by reshaping the internal processes to ensure that the firm retains its profitability in the market.
For instance, the target consumers and their demand patterns and trends are strictly responsible for influencing the actions that retail organisations like Tesco PLC pursue. Furthermore, the company already has to deploy a low-cost strategy by keeping the prices of its products as low as possible with respect to the UK market, so that more and more customers are attracted to them. While this has brought upon the positive impact of a large market share, it has also given rise to a major disadvantage, which is that of a poor profit share, since the low prices make it difficult for the company to have much margins. Thus, in such a case, the revenue is dependent majorly on the sales volume, which requires the company to strive towards maintaining its market share by keeping its customer pool satisfied. Also, the oncoming of stricter regulations pertaining the environment and its health have also prompted the organisation to fix more elaborate rules with regard to managing supply chain waste and reducing the overall carbon footprint, since both of these aspects also dictate the reputation and the profitability of the company in the long run.
M3: PESTLE analysis for detailed understanding of the macro environment
The PESTLE framework is one of the most frequently-used tools to assess the external or the macro environment that persists with respect to an organisation. In this case, the framework shall be helpful in understanding how Tesco PLC is impacted by the macro environment, and the effect it imparts with respect to the business objectives.
Political:Tax rates as fixed by the UK government, along with other political factors such as trade restrictions and political relationships impact the business processes of Tesco PLC greatly. The local council members had once called for a fat tax named the Tesco tax, and this sought to increase the price of the products that were high in their fat content (Simpson, 2014). Furthermore, the current government of the UK is rather unstable due to the Brexit proceedings as there is still a significant amount of doubt and confusion going on over it. The event of a no-deal Brexit would be disastrous since it would sever the relations with the mainland EU countries, thereby causing major implications for the retail sector and Tesco PLC.
Economic:The retailer is heavily dependent on the UK market for a majority of its revenue despite being a multinational organisation. Thus, any changes in the economy of the home country has the potential to severely impact the economic outlook of Tesco PLC as well. As already understood from the political perspective, a no-deal Brexit would be disastrous since the UK imports a majority of its food products from mainland Europe, and the time wasted at customs would make it very difficult for the grocery retailers to keep their products fresh once taken to the shelves (Farrell, 2019; Havelock, 2019). However, Tesco PLC is indeed the largest private employer, and provides a means of livelihood for more than 250,000 individuals in the country.
Socio-cultural:A majority of the UK residents prefer the approach of one-stop shopping, thereby making it evident that departmental stores and supermarkets like Tesco PLC are extremely popular in the country. Furthermore, the trend of online shopping has also gained significant importance especially due to the COVID-19 pandemic (Costa Dias, et al., 2020), and Tesco PLC has been swift to utilise this opportunity to further amplify its e-commerce operations. The company has also been quick to understand the market trends and demands, and has thus been restocking its shelves with organic produce regularly to meet the consumer requirements.
Technological:An article as published by the Workroom (2016) illustrates how Tesco PLC has been expertly using RFID technology to keep track of its inventory movement. Furthermore, the use of PayQwid has also made it easier for the customers to link their payment modes with the Clubcard, thereby allowing them to pursue cashless transactions which have essentially taken a precedence during this pandemic situation. Also, the availability of self-checkout points has also made it possible for many of the Tesco stores to remain open all-day round, thereby allowing the company to increase the market reach significantly.
Legal:Tesco PLC is no stranger to lawsuits, which can be blamed on its many practices, such as the payment of low wages, and discrimination among the employees. For instance, the company was faced with a major lawsuit in 2016 for being discriminatory in their approach to dealing with their workers (Topham, 2016). Also, numerous scandals in the following years, such as the issue with their annual report and the "Woodside farms" fiasco, which further indicates that the organisation needs to be careful about its employee and consumer policies, and adhere to the governmental legislations to avoid such mishaps in the future (Smithers, 2017; Ruddick and Kollewe, 2017).
Environmental:The "remove, reduce, reuse and recycle" programme as designed by Tesco PLC (2020b) encourages its customers to cut down on their plastic usage and to reuse the bags that the retail outlet provides to them. This initiative has also encouraged the company to take the resolution to eliminate billions of plastic components from its packaging and other elements by the end of 2020, while also reducing the carbon footprint by at least 50 per cent (Vaughan, 2012). Tesco PLC also has plans to switch their warehouses to using only the renewable forms of energy for their operations by the next 10 years.
5. Determine the internal strengths and weaknesses of specific businesses and explain their interrelationship with external macro factors.
LO4: Internal strengths and weaknesses and interrelationship with macro factors
P5: Internal and external analysis to identify strengths and weaknesses
The SWOT analysis is one of the tools that can be utilised to identify the weaknesses and strengths, along with the opportunities and threats that impact organisations like Tesco PLC. Additionally, the PESTLE analysis as conducted above can also serve as the basis for determining these SWOT factors. Thus, based on the conclusions drawn in the previous section, the identified strengths and weaknesses that Tesco PLC currently faces can be illustrated as below.
• The company provides employment to more than 250,000 people in the UK (Wallop, 2011), thereby accounting for a large number of jobs and consequently the economy and the livelihood of many people.
• Tesco PLC has a wide range of products that is ever-evolving and is sensitive to the preferences of the consumers. Currently, it not only sells groceries and perishables but also everyday essentials such as shoes, bags, clothing and cosmetics.
• The market share is also the highest in the UK at 27 per cent (Wunsch, 2020), which is higher than Asda and Sainsbury's.
• The environmental awareness and sense of responsibility of the company is also remarkably high, since it has been taking initiatives to adopt renewable energy sources and reducing its carbon footprint while eliminating the use of plastic items slowly and steadily.
• Tesco PLC has an extreme dependence on the home market for its revenue and profits, which implies that even the slightest reduction in the domestic market share can lead to major problems for the company.
• The company is also prone to being affected by any discrepancies on part of the government decisions, such as the Brexit uncertainty.
• Many scandals and other reputational disasters have had an adverse impact on the brand image, and the continuation of such events can majorly affect the sales volume by discouraging customers from shopping at the retail outlets.
P6: Interrelationship of strengths and weaknesses with external macro factors
As can be understood from the identification of these strengths and weaknesses, Tesco PLC is continually affected by external factors that have the potential to define its decision-making processes and impact its business strategies. Thus, this also proves that there is an interrelationship that exists between the external macro factors and the strengths and weaknesses that the company faces.On a critical analysis of these identified elements, the following conclusions can be drawn on the basis of this interrelationship.
1. The reason as to why Tesco PLC is dependent on the domestic market for its revenue is because of the market share it enjoys, which in turn is the result of its low-cost strategy that it has adopted in a bid to attract the maximum possible customers.
2. The impending uncertainties over a no-deal Brexit is something that Tesco PLC needs to battle and resolve since a majority of its fresh produce is imported from mainland Europe. This also brings forth the threat of having to increase the prices, which can in turn impact the market share and consequently, the sales volume, the revenue, and the profit margins.
M4: SWOT analysis and justification of the influence on decision-making
As already stated, the SWOT framework enables the easy identification of the internal and external factors that either strengthen, weaken, threaten or provide opportunities to an organisation. In case of Tesco PLC, these four elements can be summarised as below.
Table 1: SWOT analysis of Tesco PLC
- Tesco PLC's revenue has been increasing steadily over the past many years, thus implying that its growth has been rather impressive and uniform as compared to its rivals in the UK market.
- The product and service range are diverse, and the company has numerous kinds of outlets such as Tesco Express, Tesco Extra and Tesco Superstores to meet the varying needs of the target consumers.
- More than 25 per cent of the UK retail market belongs to Tesco PLC (Statista, 2020), which indicates that its market stronghold is absolute and noteworthy.
- The heavy reliance on the UK market has made the company focus more on the national stores and has restricted its development on a global scale.
- The share prices of the company have been fluctuating majorly due to the issues related to a no-deal Brexit. This has also brought forth a decrease in the profits of the organisation (Farrell, 2019; Havelock, 2019).
- Tesco PLC has been adopting a low-cost strategy, which limits its ability to charge more for the products, thereby reducing its profit margins considerably. The impact is high since the regular margins on groceries and food products are anyway quite nominal.
- Scandals such as that related to the Woodside Farms (Smithers, 2017), along with the misrepresentation of profits and other financial data in their 2017 annual report (Ruddick and Kollewe, 2017) have reportedly ruined the reputation of the company.
- There is a major opportunity for the expansion of its Jacks stores, which Tesco PLC acquired recently (Butler and Wood, 2018). This can enable the organisation to compete more fiercely with discount retailers like Aldi and Lidl.
- India and other Asian countries have a promising scope for retail businesses due to their high population and ever-improving disposable income rates. Thus, expansion into such regions could be a positive step for Tesco PLC.
- The finalisation of a no-deal Brexit will increase the prices of the products significantly, and force Tesco PLC to do away with its low-cost strategy and thus bring the threat of losing out on the market share.
- There are already a large number of retailers in the UK such as Asda, Sainsbury's, Morrisons and Waitrose, and their presence further threatens Tesco PLC since it only means that the organisation would have to work harder to maintain the market share as well as the trust of the consumers.
Similarly, the SWOT analysis for BBC can also be elaborated as below.
Table 2: SWOT analysis of BBC
- As previously stated, BBC is the largest broadcaster in the UK and is extremely popular on a global scale as well.
- A strong brand image has opened up new opportunities for the company which has been possible due to its robust marketing team and their strategies.
- The service offering does not stop just at news as in the recent times, the company has opened up newer TV channels that have more interesting and inclusive shows.
- Many viewers feel that BBC is biased when it comes to reporting the news (The Week, 2020), which has tainted its reputation to some extent.
- The operating costs are high in comparison to the revenue that is generated, which indicates that it faces issues in terms of dealing with its market rivals.
- One major opportunity that BBC can utilise is that of showing unbiased news, which will greatly increase its supporters and viewership.
- Having a joint partnership with other satellite channels can also be beneficial.
- Increasing competition from CNN and other channels has restricted the market prospects for BBC.
Thus, as can be understood from the information as presented above, the internal as well as the external factors both influence the decision-making processes as well as the business objectives for any organisation. The understanding of the external factors allows Tesco PLC to modify its business processes while having a good idea of the internal factors also enables the company to be prepared for any issues within the workforce during the implementation of any new plan or framework. Thus, since Tesco PLC is heavily reliant on the UK market, expanding into a developing country with a high population can have promising results, while working to prioritise the Jacks store range can also take off some of the pressure from its regular stores by neutralising the competition from Aldi.
Similarly, BBC's major threat or weakness seems to be the presence of other rival channels that reportedly broadcast unbiased news. Even though much of its revenue does come from its subsidiary channels such as BBC One and others, taking steps to report the real-life facts can greatly increase its market scope.Thus, there exists an interrelationship between the micro and macro factors with the decision-making processes as well as the business objectives.
There are thus different kinds of organisations as far as the size, structure, scope and legal aspects are concerned. The one thing that remains constant across all such organisations is that they all are affected by the internal and external factors, since they are responsible for the decisions that are to be made, and the business objectives that need to be set.