An organisation is a legal entity comprising various peoples, such as associations, individuals, and institution that work together in a business or public serving to accomplish common objectives. Each organisation has a management structure which determines and maintains the relationships between different stakeholders and activities to ensure that each role, responsibility, and authority is designed to achieve the organisational goals. There are different types of organisations which are divided based on their characteristics such as private, public, legal and voluntary, each of these organisations have different organisational structure, legal framework, size, scope, and stakeholders.
This report will evaluate different types of organisations based on their characteristics and provide various examples to understand their functions and attributes. The report will discuss various organisational functions and assess their connection with the structure and goals of a corporation. Further, the report will analyse environmental factors that positively or negatively impact or influence the organisational structure of “Hennes & Mauritz”. The file will evaluate various internal and external environmental factors to determine the weaknesses and strengths of H&M and connect them with external sources.
Organisation is a legal body which includes various parties who work together in order to accomplish common goals. Following are explanations and legal structure of different types of organisation along with examples.
A public organisation is a company whose capital is divided into small parts called share; such shares are freely traded on the stock exchange and a person become the owner of a company by purchasing its shares (Luoma-aho, 2008). According to Pichault (2007), a public organisation can be listed or unlisted. The listed companies are able to sell their shares on stock exchange. As compared to other organisational structures, public organisations larger in size due to their ability of raising capital through sale of shares (Coluson-Thomas, 2012).
The legal structure of a public corporation is considerably complicated than compared to other companies since it requires complying with multiple legal requirements. For example, a public organisation is required to continuously file disclosures regarding various aspects such as directors holding, annual statements, IPO, promoters holding, audit report, and many others (Ng and Lossemore, 2007). The legal structure of a public organisation is complex and strict because it involves public money. The company is requiring notifying stock exchange of any significant change in management or shareholding.
Registration of a public company is compulsory, and without registration a public company cannot attain its separate entity status. At the time of registration, minimum two directors and one secretary are necessary, and the minimum share capital must be £50,000 among which £12,500 must be paid up capital (Von Bogdandy, Dann, and Goldmann, 2010). The company is also requiring preparing memorandum of association and article of association which include the necessary framework and other essential details. Following is an example of public organisation to understand its various aspects including size, scope, objectives, mission, vision, and stakeholders.
Tesco PLC is a British international organisation which operates in the retailing industry, the company was founded in 1919, and its head office is situated in Hertfordshire, England. The organisation is the largest retailing corporation in the United Kingdom, and it is one of the world’s largest retailing chains with operations in more than 12 countries (Tescoplc, 2017). The stakeholders of the organisation include customers, shareholders, employees, local communities, shareholders, and government.
The company has more than 6550 retail stores throughout the world that are operated with the help of more than 476,000 employees (Tescoplc, 2017).
The company’s mission is to enhance the value of its customers and to earn their lifetime trust.
The corporation’s vision is to provide high-quality products and services to communities through loyal and dedicated employees and maximise the growth and shareholders’ value by implementing innovating strategies.
- Trying harder for customers and fulfilling responsibilities by understanding the requirements of customers and societies (Tescoplc, 2017).
- Treating people with respect and trust and support them by working in a team.
- Performing little acts of goodness to make a big difference, such as reducing wastage, serving food to poor peoples, providing quality products and services, and positively contributing to the society.
Tesco’s organisational structure incorporate various functions including direction, management, human resource, financial, trading, customer care and many others. The company uses strategic planning to incorporate objective, mission, and vision into the organisational structure (Imrie and Dolton, 2014). For example, the human resource department ensures selection of qualified employees that are loyal and dedicated. The company provide appropriate training to the workers, so they are able to assist customers in satisfying their shopping requirements. The top-level management develops strategies in order to accomplish organisational objectives. For example, personal management ensures that customers are satisfied with the services and their feedback is properly received by the company (Jones, Hillier and Comfort, 2013). The company also establish various social welfare campaigns for the welfare of local communities and ensure that they are not polluting and wasting resources which assist in fulfilling their mission, vision, and values.
A private organisation is a company which has a relatively small number of shareholders, and it did not offer or invite public to buy its shares (Ronit and Schneider, 2013). A privately held corporation is not able to list its share on the stock exchange. A private company has a separate entity from its owners, and it is mandatory to add ‘private limited’ in its name.
Unlike a public corporation, the private company requires one minimum director and one secretary during registration and at least one shareholder. There is no provision for minimum or maximum share capital requirement in private companies (Kaasenbrood, 2013). A private company limited by shares is not authorised to issue more share than prescribed in its memorandum of association. A private company has to comply with relatively less compliance than compared to public corporations because the number of members is limited and public capital is not involved.
PricewaterhouseCoopers or PwC is a private limited company which was established in 1998 with a partnership between two firms. The company operated in the professional service industry, and it is one of the big four auditor corporations. The head office of PwC is situated in London, United Kingdom. The company’s stakeholders include clients, government, shareholders, public and others (PwC, 2017).
PwC is world’s second largest professional service firm which operates in 157 countries with more than 236,000 employees (PwC, 2017).
To provide fair and straightforward auditing services to gain the trust of its investors and members.
- Maintaining strong ethics
- Adopt as per market conditions
- Providing international expertise
- Becoming leading participant in auditing and accounting standards
- Motivating partners and employees to perform better
- Gaining specialty in many sectors
- Advising leaders regarding business strategies to drive performance
- Implementing growth strategy in developing markets
- Implementing strategic plans to fill the gap in ambition and delivery
- Sustaining corporate growth
- Providing local expertise to more than 170,000 peoples around the world
PwC’s organisational structure includes partners, evaluation committee, executive officers, risk management, manufacturing and distribution department, and finance service department. These divisions perform various organisational functions that are linked with each other to ensure the company achieve its goals. The partners and executive officers implement strategic policies to ensure satisfaction of organisational objectives. The primary objective of the corporation is to provide high quality and fair auditing and consulting services to its clients and the organisational structure focus on achieving such goal (PwC, 2017). The company’s research, design and human resource functions linked with each other to ensure hiring of highly qualified and skilled employees, so they are able to perform their job according to corporation’s standards.
One of the primary roles in PwC is of risk management department; it ensures that corporation is complying with necessary legal requirements. Proper implementation of ethical principles is significantly important for PwC since their work affects public capital. The audit labs, risk assessment staff, quality review and other department ensure that all the work is performed with ethical policies. Being a private company, the regulations of PwC are considerably low, and they maintain a strict organisational structure to meet their mission, vision, and values.
A voluntary organisation is an association of a group of individuals who enter into an agreement to provide their services to accomplish a specific objective voluntarily. These are non-profit corporations which focus on benefiting specific part of society rather than maximising its profits (Easton, Atkin and Hare, 2007). For example, environmental groups, trade unions, professional associations, self-help groups, charity organisations and many others.
In order to provide voluntary and no profit service, an association can choose different structure such as limited company, charity, community interest company and co-operative. The community interest companies (CIC) include a community interest statement which included its future plan and objectives. The assets of CIC are locked and can only be used for social purposes, and there is a set limit for the amount provided by the corporation to the shareholders. The legal provisions of limited company apply to non-profit organisations as well (Butler and Wilson, 2015).
American Red Cross
The American Red Cross is a charitable corporation that provides various non-profit services such as disaster relief, emergency assistance and education in different parts of the United States of America. This association was formed in 1881 and its head offices situated in Washington, D.C., United States (Briones, Kuch, Liu and Jin, 2011).
The company operated throughout different states in the United States and helped peoples in danger. The corporation has more than 500,000 volunteers along with 30,000 employees. The company also train 12 million people’s necessary medical skills so that they can help others in a disaster.
The company’s mission is the lead safety operations by volunteers and provides relief to the victims who suffered loss due to natural disasters and emergencies.
- Becoming an outstanding nationwide provider of tissues, blood, and plasma.
- Providing blood, tissues, and plasma to required peoples and providing safety, medical, scientific, business and manufacturing services to individuals who are in need.
- Providing necessary services to victims in disasters and emergencies
- Reduce the number of causalities caused due to natural disasters
- Giving necessary medical skills training to peoples, so they are able to heal others
- Promoting good conscious, helping nature, support, and diversity
- Enhancing moral values of its volunteers
The organisational structure of ARC include directors, chairman, general secretary, fund generating department, internal auditing team, logistics, training department, budget, legal officers and voluntary member support staff. These members perform different organisational functions that are collaborated with each other to accomplish corporate goals. The top-level management ensures that corporation is achieving its organisation objectives by fulfilling its moral duties (Redcross, 2017). The company provides only a specific amount of its profits to the shareholders and staff members and use rest to provide necessary services to the victim. Most of the members in ARC are voluntary which means that did not take any salary to provide their services. The internal auditing committee ensures that the money donated by the people are only used in disaster and emergency situations, it allows company to accomplish its mission, vision, and values.
Impact of Macro Environmental Factors on H&M’s Business
Macro environment defines major external factors that are uncontrollable and has a significant influence on the operations, strategies, and performance of a corporation. Before formulating new business policies, management thoroughly assesses and examine these factors. According to Gupta (2013), these factors positively or negatively influence the performance of an enterprise, therefore, management carefully evaluate these factors. The macroeconomic environment includes various factors such as political, economic, social, legal, technological, and ecological. The acronym PESTEL is used to define the external factors that influence a company’s business, operations, and performance. Globalisation has increased the level of competition among multiple industries, and corporations can attain a competitive advantage by formulating business policies after thoroughly assessing external factors (Chen et al., 2014). These external factors are affected due to major changes and development in the microenvironment of a business that is outside the control of management (Barkauskas, Barkauskiene, and Jasinskas, 2015). The example of macro environment includes natural disasters, change in customers’ preferences, competitors, government regulations, growth in interest rates, and many others.
Hennes & Mauritz (H&M) is Swedish international clothing retailer chain; it was founded in 1947 by Erling Persson. Currently, the company has more than 4,500 stores in over 62 countries, and it employs more than 148,000 individuals (H&M, 2017). The corporation manufactures fast fashion clothes for women, men, youth, and children; the firm sells its clothes in both online and offline stores. The corporations head office is situated in Stockholm, Sweden; it had revenue of US$21.73 billion in 2016. The first store of H&M was situated in Sweden that only offers women clothing; the company started its international expansion in 1952 and began offering men clothing. H&M provides its services under six separate brands which include ARKET, & Other Stories, H&M, Collection of Style, FaBric Scandinavien AB, Cheap Money, Weekday and Monki. In H&M, women managers hold more than 75 percent of management positions, and they represent around 50 percent of the board (Peck, 2016). H&M is world’s second-largest clothing retail chain, following ZARA. Currently, the company operates in more than 62 countries, and various external factors influence its performance, the management is required to analyse these factors to sustain future development of the company (Islam and Deegan, 2010).
H&M is a global brand that provides services in numerous countries, and they are continuously under pressure to ensure proper compliance with international laws. Being a global brand, H&M is required to continuously monitor and track various political risks that possess threat to its operations (Hiltunen, 2008). For example, people reacted negatively against the decision of H&M to open its first store in Israel because Israel did not comply with international laws. The Israeli officers provided that H&M will help them economically by opening its store; the store was situated near a controversial area where Palestinians were brutally killed and expelled. More than 22 organisations protested against H&M’s decision and many customers boycotted them. The economic condition of different countries influence the business of H&M; the company offers competitive pricing on their products by efficiently maintaining inventory system and negotiating best prices from the suppliers.
The change in interest rates, currency rates, and inflation make it difficult for the company to keep their prices stable in each country. Although, despite negative influence of Brexit, the company reported 7 percent increase in its sales. The primary reason for that being emerging BRICs markets which increases the number of customers for the corporation. The BRICs is an acronym for Brazil, Russia, India, and China; these countries provide potential new market share and customers to the corporations (Holtbrugge and Baron, 2013). Modern organisations are requiring maintaining various socio-cultural policies to keep their positive brand image; the companies are requiring maintaining transparency in their business to ensure they fulfill corporate social responsibilities. H&M is required to various laws provided by labour laws and maintain a hygienic, safe and healthy environment for its workers. H&M analyse its customers demand from social media sites and other sources to maintain its prices at a reasonable level to attract a large number of employees.
The digital revolution has changed the retailing industry; corporations are required to implement the latest technology into their operations to ensure they satisfy their customers’ requirements (Berman, 2012). The fashion industry is constantly changing, and new trends are coming every season, successful companies stay one step ahead of their competition by using the latest technological advancements into their operations. The implementation of modern technology also increases the risks of cyber-attacks on H&M which increases the requirement of cyberspace security. H&M is known for their online facilities and excellent online shopping experience and to maintain its security, company is required to invest heavily in cybersecurity software. The role Corporate Social Responsibility in increasing in international markets and customers analyse whether corporations are fulfilling their moral duties before using their products and services. H&M has been involved in various legal disputes in past two years, for example, the company lost a patent dispute for infringing Bra designs against a UK corporation (Cockroft, 2015). Other than proper compliance with international laws, H&M’s legal team is required to examine and implement various domestic and customary laws while operating their business in BRICs markets. H&M is a global brand, and the company maintains its reputation by formulating necessary environmental protection regulation.
The company analyses and formulate policies for its external environment after evaluating its strengths and weaknesses. The strengths of H&M include a wide variety of products, unique identity in the market, diversified global presence, and strong financial condition. The company is second largest clothing retailer in the world, and it has a strong brand image between people; the corporation focuses on diversifying its operations by adding new products and services to provide the latest trend to its customers (Trompenaars and Hampden-Turner, 2011). The company offers its products at reasonable prices by using few middlemen in supply chain and purchasing material at high volume. H&M also has various complementary businesses that offer flexibility and control over operations; use of celebrities and designers in marketing campaigns increases firm’s global reputation. Along with strengths, the company has various weaknesses as well, such as, dependence on third party suppliers, following after trends, and maintaining affordable pricing adversely affects its products quality.
The negotiation ability of company is low because it is depended on third-party suppliers to maintain consistency in their products; rapid change is fashion and technology also risks corporation position in the market. Buying material in high volume can create the problem of overstocking in the company; the company uses complex machinery to maintain high quality in their products, and their maintenance costs are considerably high. Modern market condition possesses multiple opportunities for H&M such as expanding its e-commerce operations, potential market share in BRICs market, improving lifestyle of peoples, and focus on expansion of operations to improve profitability. The company can attract potential customers from the BRIC market and increase its market share (Biggemann and Fam, 2011); the lifestyle of customers is changing, and they prefer to pay extra for products that are not made by killing animals and which are environment-friendly. People are attracted towards high-quality fashion products, and company can charge extra prices for such products.
H&M already successfully provide e-commerce services in more than 38 countries, and they can expand its online facilities in other markets as well, especially in BRICs markets (Lindner, 2015). The changing market condition possesses various threats for H&M such as evolving fashion trends, intense competition, e-commerce attract new entrants, increasing labour costs in developing countries, and fluctuation in foreign exchange rates. The competition in the retailing industry in fierce and popularity of e-commerce websites has increased the number of competitors. H&M’s management assesses the business strategies of ZARA and other competitors to ensure its products are adequately priced and according to the market trends, otherwise, H&M can lose its market share to its competitors. Significant political or social actions, such as Brexit, fluctuates foreign exchange and bank interest rates adversely affects H&M’s performance in several countries (Busch and Matthes, 2016).
The strengths and weaknesses of H&M are interrelated to its macro-environmental factors that influence operations and business of the company. For example, H&M has been involved in various controversies in past few years, but its strong brand image helped its business to survive in difficult conditions. The decision of UK to exit EU (Brexit) affected many stores of H&M situated in European countries and the United Kingdom, but the company reported growth of 7 percent in global sales because of its expansion in BRICs countries (Dhingra, Ottaviano, Sampson and Van Reenen, 2016). ZARA decided to expand its business in BRICs countries; the number of ZARA stores in China has increased 60 percent between 2007 and 2012, in the UK the growth is 3 percent (TranslateMedia, 2016). Following ZARA’s strategy, H&M expanded its business in China by opening 490 stores; it shows the effect of competitor strategy over business (H&M, 2017). The economic factors, like Brexit, did not affect business of H&M as it reported a growth of 7 percent in worldwide sales.
The digital revolution has both positive and negative influence on H&M ‘s business. For example, the popularity of e-commerce enables the company to offer its services through online portal which increases its sales and market share, whereas, e-commerce also allowed new competition to emerge in the market since it requires low start-up cost (Kalathil and Boas, 2010). The popularity of Corporate Social Responsibility principles and global shift towards ethical standards has increased companies’ responsibility towards their stakeholders (Lindgreen and Swaen, 2010). H&M maintain transparency and promote gender and racial equality in its operations; the company also publish yearly suitability report which contains evaluation of directors’ decisions and their contribution towards sustainability of stakeholders’ value and company’s growth (H&M, 2016). The fulfillment of corporate responsibilities and transparency in operations assist in building a strong brand image of H&M in international markets which eventually increases its growth.
From the above observations, it can be concluded that public, private and voluntary sectors are different type of organisations, based on their features and legal structure. Example of three different corporations has discussed in the report to clearly understand the difference between legal, scope, objectives and functions of different organisations. Hennes & Mauritz is an international fast fashion brand that offers its products and services worldwide. The company’s operations are influenced by various macro environment factors such as political, technological, legal, environmental, economic and social. These factors have a significant impact on the business and operations of H&M because they are interrelated with its strengths and weaknesses.
The political, economic and social factors affect the reputation of H&M; a strong brand image provides them a competitive advantage. The growth in digital advancements affects the business of H&M both positively and negatively because it increases online customers along with competitors. The management assesses policies of competitors such as ZARA to before formulating its organisational strategies. The economic and social factors increase the requirement of proper implementation of ethical principles by the management of H&M, the fulfillment of corporate responsibilities and maintaining transparency in operations help in sustain future development of H&M.
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