The report discusses the knowledge and understanding of business, the functions and external wider environment in which the organizations run its operation. A business environment is the sum of overall external and internal factors that broadly influence a business. The marketers should keep in mind that external as well as internal factors could influence each other and work together to affect the business. It is not certain that external or internal environmental factors influence the business, as there have been different types of organizations with varieties of size and types.
Hence, Dragnic (2014) commented that understanding of the environment within the business helps to operate a business units successfully at any place. The marketers insist on knowing about the different components of the business environment that may include the economic aspect, the socio-cultural aspect and the political framework. The current report discusses how the type and size of the organizations are influenced by external and internal environmental factors. Likewise, the report provides the discussion about different organizational functions that are influenced by broader environmental factors. The report highlights areas in macro environment that have large impact on the business.
Different types of organizations
As the business opportunities are extending with the technological advancement and innovation, different types of organizations come into the existence. Decades ago, the non-profit organizations find it challenging to stand its purpose in the environment. In the present days, the non-profit organizations are equally capable of contributing to the nation’s economic development. As put forward by Andreasen (2012), an organization in which no owner, stakeholder and trustee share in profits and losses, and which exists not to earn revenue but to promote the mission that increases the public welfare is known as the non-profit organizations. Such types of organizations are eligible for tax-exempt status and some, but not all could receive tax-deductible contributions.
As mentioned by Lovejoy and Saxton (2012), non-profits refer to the groups whose purposes are to benefit the public. On the other side, Galaskiewicz (2016) mentioned that there are 20 categories of tax-exempt organizations that falls under the criteria of non-profit organizations. These include the organizations that are charitable, religious, educational, and scientific and others.
In addition to this, the “charitable purpose” are defined as the activities beneficial to the public interest and serving an open class of people. The key characteristics of a non-profit corporation are such as purpose, ownership, control and accountability. Like the profit organizations, the non-profit organizations earn income through the products and services that are sold. For example, the non-profit organization “Childline” is one of the famous organizations in UK providing the support to the people under 19 (Childline.org.uk 2017).
This non-profit charitable firm is associated with the social development and receives funds from different MNCs. Nevertheless, the non-profit organizations often rely on private contributions, government grants as well as grants from the foundations. The largest source of the non-profit organizations outside the products and services sold is the private contribution. The profits earned by the non-profit organizations are not distributed to the shareholders. However, the profits pay for the reasonable salaries, expense and activities.
The objectives of the profit organizations are to let potential customers learn about the products and services. A for-profit organization could be formed to conduct any number of lawful business activities. The major reason to form a profit organization is to earn the revenue for the owners of the company. As commented by Boone and Kurtz (2013), a business and other organization whose primary goal is about making money, as opposed to a non-profit organization which focuses on the goals such as helping the community as well as is concerned with money and the necessity to keep the organization operating.
Non-government organizations- A non-government organizations is a non-profit organizations that is widely dependent from state and the international government organizations. These organizations are usually funded by donations but some could avoid formal funding and operated primarily by volunteers. A non-governmental organization is a non-profit, citizen-based group that could functions independently of government. Palttala et al. (2012) defined NGOs as the organizations that include the organizations that support human rights, advocate for improved health or encourage political participation.
Micro, small, medium-sized enterprises (SMEs)
In small organizations the equity help by the founder and the family, owners usually manage the firm. The autocratic leadership style is usually nourished in the small of organizations. The organization run the operation the operation through short-term planning process to get the tasks done (Laforet 2013). The organizational needs meet by leveraging the personal net worth. Due to the lack of capital, the small organizations usually run the operation in the local market with the personal development opportunities.
Medium size business- The medium size organizations are privately held with limited public. While running the operation, the owners and the professionals play the key roles in the organizations. When the organizations need to strategic decisions, it usually relies on the CEo and some key leaders. The long-term planning of the firm are developed by the owners and the key executives. As mentioned by Vaccaro et al. (2012), the medium size organizations also feel the scarcity of required capital which sometimes stand as the challenge for the organizations. The medium size organizations also have the limited customer base; especially, it is limited to geographic and industry niche. The organizations provide the personal development plans for the potential or the key employees.
Micro size organizations-
Micro size organizations are those operating in the formal sector, forms the wide majority of business in most developing nations. These types of organizations are often called own-account workers, the self-employed as well as small family operations. They are unlikely to benefit directly from the changes to the formal policy environment. Arguably, Cameron and Whetten (2013) mentioned that such type of organization only benefit from the procurement as well as infrastructure programs if they are consciously included.
Different business purposes, objectives and supply of goods and services
Business objectives are something, which a business organization wants to achieve or accomplish over a particular period. These objectives are set to earn profits for its growth and development to provide quality goods to its customers to protect the business environment. As mentioned by Sappraser and Clausen (2012), a business has a single objective, that is to make profit but it cannot be the only objective of the business. While pursuing the objectives of earning profits, the business units do keep the interest of their owner view.
There are several business objectives such as economic objectives, social objectives, human objectives and national objectives. As mentioned by Mathur, Mathur and Kenyon (2012), the business objective is referred to the objectives that are significant to be pursued to achieve the profit objectives. This may include the formulation of customers, regular innovation and the possible use of resource. For example, the purposes of non-profit organizations allow people to join as well as combine the resource to accomplish the common goals. In addition to this, the non-profit organizations around the general purpose, such as stamp collecting, shared goals, etc. The individuals start working on the special problems or responding to the needs in their communities.
Supply of goods and services-As the business utilizes different resources of the society, the society needs to expect the quality of goods and services from the business.
Different functions within the organizations
As put forward by Miyake and Friedman (2012), in order to sell and produce the service, most of the large organizations need to undertake 6 different key functions. The functions include the role of marketing, human and finance resource, administration, research and development.
Role of marketing- The department of marketing researches the needs and demands of customers to enhance the strategy and product. The marketing department needs to the take the responsibility of investing the market they are aiming at the type of consumer making up the market as well as the preference of the customers within that market (Karlicek et al. 2013). The marketing department of the firm then needs to analyze consumer preference with producing a product that is profitable. Likewise, once the product has been developed and designed by the production department, the department needs to advertise and promote the product with packaging. The sales are responsible for persuading the consumers to buy the product, which is manufactured through market’s research.
HR functions-The major responsibility of the firm is the recruitment of new talents, selection, training and development. The HR department also takes the responsibility of retaining the key employees by providing performance appraisals. The HR department needs to comply with the legislations applicable to the nation (Solnet, Kralj and Baum 2015). For example, the organizations in UK need to maintain the personal records in a manner that is compliant with the Data Protection Act 1984. The HR department often implements a welfare role, which includes the action of taking care of the needs of the employees.
Financial functions- This department of the organization need to keep both manual as well as electronic records of money received as well as paid out by the organization. This particular function then be used to produce different financial statements for tax purpose as well as to comply with the legal requirements.
Administrative role- The role of administration could include dealing with all administrative tasks such as mail handling documents and computer services. They produce the documents for maintaining the organizational premise (Gebauer and Kowalkowski 2012). This function although may not always recognized as vital but it is the glue that holds the organization together. For example, without the administrative department, the complaints of the customers remain unresolved, which contributes to the poor organizational performance.
R&D functions- The aim of research and development is to enhance the existing products, develop new and better products as well as improve the manufacturing methods. This could enable the organizations to minimize the cost and increase profitability.
Organizational functions relate to the mission and objectives
The organization develops its mission and objectives based on the strategic capabilities it develops. A mission and visions are standard and critical elements of firm’s organizational strategy. Thus, each department of the firm needs to work considering organization’s mission and objectives. As commented by Zelditch Jr Berger and Cohen (2015), company’s mission statement is essential, as it serves the guide for organization’s decision-making.
The organizational structure is the setup or the framework that effectively determine the hierarchy of people, workflow, its functions and the reporting systems of the organization.
Bureaucratic organization- A bureaucratic organization is the type of management that has a pyramidal command structure. This degree is largely organized with the charts generally exist for each department as well as the decisions are made through an organized process. As mentioned by Van der Voet (2014), a strict command and control structure is present at all time. This structure is meant to be orderly faire and highly efficient. A bureaucratic structure of the firm has two basic characteristics. Firstly, it follows the hierarchical order, which means the firm develops the levels of management where the lower levels remain as the subordinate. The lower level of management is answerable to higher levels.
Post-Bureaucratic Structure- The post bureaucratic organizations are highly developed as well as have different standards and procedures, with the central command consisting of several board members, where decisions making are done with the help of democratic procedures (Maroy 2012).
Matrix organizational structure- Matrix organization structure is considered as the hybrid of functional organizational structure. In this structure, the organizations have to deal with two different command strictures namely vertical and horizontal (Lunenburg 2012). Hence, an employee could be the part of a functional group but she/he might work on the project.
Functional organizational structure- This structure is widely used by the organizations and in this structure, the organizations is grouped into different department where employees with similar skills are kept together such sales department, marketing department and finance department.
Strategic business units- A strategic business unit, well known as SBU, is a fully functional unit of the business, which ahs is own vision and direction. Characteristically, SBU operates as the separate unit but it is also a significant part of the company. As put forward by Fisher, Campbell and Svendsen (2012), strategic business units are absolutely is necessary for the multi-product firms such as FMCG products. The organizations that follow the strategic business units are Unilever, P&G and LG.
Organization structures and complexities of transnational, international and global organizations
Each of the term is specific and carries a specific meaning that determines the scope and the degree o the interaction with the operation outside of the home country.
International organization- The international organizations are the importer and the exporters; they cannot make investment outside of their home country.
Global organizations- The global organizations tend to make their products with the use of coordinated image and brand in the market. In general, one corporate office takes the responsibility for the global strategy (Cosh, Fu and Hughes 2012). The major emphasis is put on the volume cost management and efficiency.
Transnational organizations- The organizations with such characteristic are often complex. They make large investment for the operation in the foreign country. The organizations are relied on the central corporate facility but the individuals are given the right of decision-making, R&D and the marketing power, when they take responsibility of the operation in the foreign country.
Context of the macro environment
Application of PESTLE analysis-As the society is developing by leaps and bounds, legal factors have a significant role play in decision-making (De Bruyn 2012). Thus, PEST analysis is further developed with adding two significant elements. Likewise, the environmental hazards have increased after the industrial revolution expanding the business with their own effects on the environment.
Political factor- Politics plays a significant role in all nations as well as there are ruling parties as well as positions. Thus, if the business faces any issues in politics the same should be reflected in pestle analysis. For example, the occurrence of Brexit has largely affected the oil and gas organizations as the drop of oil price affected profit margin of many large organizations British Petroleum. On the contrary, the sports retail giant Sport Direct has largely been affected with the introduction of commodity codes, new taxation policies and the licensing in UK (Sportsdirectplc.com 2017). Thus, the changes in the political environment affect the operation of the organizations.
Economical factor- Economic factor plays a dominant role in operating the business. For example, if British if furniture company IKEA from UAE wants to expand in UK, the business might not be viable (Yüksel 2012). Likewise, if British Petroleum from UK wants to expand the operation in Kenya, the company might lose the revenue due to differences in the economic conditions between the two nations. So, it is visible that changes in the economy makes big difference in the business.
Social factors- It is essential for the organizations to develop the products based on the culture of the market. For example, the fast food chain “Five Guys” in UK wants to open a branch in Oman, it has to follow the social norms such as “Halal Chicken”. The customers do not eat chicken items if they are not “halal” (Van der Spiegel et al. 2012). Hence, the implementation of PESTLE determines the norms that need to be implemented in the operation.
Technological factor- Undoubtedly, the technological advancement have facilitated the ways of developing the business. The use of technology in any operation reduce the time and cost. For example, if Starbucks, UK wants to open the brunch in any poor nation like Bangladesh, the firm many not be able to provide the facilities like “Free Wi-fi” due to lack of technological facilities. Thus, this factor of PESTLE determines the technical facilities available in the market where the firms aim to get in.
Legal factors- Legal factors significantly affect the operation of the company in any market. Different laws of export, import, employment law, consumption protection, intellectual property and the data protection are there to influence the business from the legislative perspectives. For example, any oil organizations in Kuwait run the operation but it falls under the criteria of tax exemption. However, when that firm wants to run the operation in UK market, it has to follow the trade regulations and trade policies.
Environmental factor- There are different environmental laws developed by the government that should be followed while getting into the market. For example, the amendments done in the Environmental Protection 1990 UK, prohibits the use of plastics (O'Riordan 2014). This means any global organizations cannot use and promote the use of the plastic in the country.
Organizational initiative in monitoring and forecasting the external influences and the impact of the macro environment on the business
Several forces at work significantly drive the business. As put forward by Sheehanand Bruni-Bossio (2015), the organizations in the recent time and their managers are faced with significant amount of factors that require immediate response. The external environment is the factors that cause change inside the organizations. The competition, customers, the economy, technology, political and social conditions are the key external factors that certainly make differences in business. These forces can be controlled if the organizations keep a close eye on the frequent changes. If a business sustains for long in a particular market, it should learn the possible change that occur. The market understanding usually comes from the past and present operation.
Similarly, the firm needs to understand the economic value of nation, as the growth of the business is influenced by the economical stability of the nation. On the other side, the market demands also influence the growth of the business. For example, the electronic giant Samsung cannot sell its electronic products with the same as they sell in Asian market. In UK the economy is high; thereby, the organizations deal with the pressure of developing the quality of products. Conversely, the Asian country like India, the economy is comparatively low than UK; thus, the people are price sensitive.
Impact of the digital revolution on production and consumption
As put forward by Brynjolfsson and McAfee (2012), the Digital revolution is the continues change and the evolution from the earlier models of analog, mechanical as well as electronic technology is the digital technology. The development in the internet has changed several industries but some have as rapidly as marketing. For example, few decades back, the organizations have to promote the products and services through traditional media such as television, radio, print media and other related channels. However, in the present days, the organizations have many opportunities to promote the business such as SEO, social media marketing community management.
Moreover, the organizations would find it challenge to reach the wide target market as due to the lack of available channels and finance. Conversely, the organizations in the present days, reach the target market through digital marketing channels before it starts the operations. This means the organizations conduct the online survey to learn about the like, dislike, trends, preferences of the people live in that region. Thereafter, the products are developed based on the result found. With the help of technology, the organizations gain the ability of producing large amount of the goods, which eventually enhances the consumptions.
The impact of social technology
The technology has contributed to the growth and development of the industries or to the process of the industrialization. Technology is rapidly changing and creating the large impact on the business industries as well as on the life of people. The availability of social technology like cell phone has brought an easy-access to this broad world (Trainor et al. 2014). The people at corner on earth could connect to the people at another corner. This also influences the business as well, since with the help of social networking, the organizations promote their products and services and receive the feedback from the customers. Thus, the business follows a clear pattern that is not hidden. Due to the advancement of technology, a career in marketing is more fascinating than just a career in marketing.
Emerging BRICS market- The BRICS club is well known for its tremendous growth potential and in the recent time, it is midst of severe economic woes. However, these emerging markets have largely been affectedly due to the continuous fall of global commodity price. Sharma (2012), mentioned the facto of federal rate increase but global pace of the commodity could be the major reasons.
Global shift in economic and social power ethical and sustainable growth
As mentioned by Epstein and Buhovac (2014), the emerging economies that were increasing rapidly, especially in brazil and Russia a, are both dealing with the crisis in economy. The recent drop of global commodity price has played the role in turning the economies in reverse in spite of the developments in the political environment. The earlier significant engine of global progress, China, has observed its slow economy. Although, China is increasing with the BRICS pace compared enhanced western economies, the nation has observed a slow growth of economy, which is not favorable for new business.
Organizations overcoming transformation process and resistance to change in dynamic market environment
The organizations have no choice but to change as the world is moving and shifting rapidly. The marketers are aware of the fact and they put effort to cope with the environment. They apply their thoughts to the structure, systems and process that are required. Each industry certainly faces a dynamic environment; thereby, based on changes the structural changes are made in the firms (Zhao, Lu and Wang 2013). The enhanced business structure provides the efficiencies, innovations as well as agility that organizations should succeed as well as sustain. The changes in the market force the employers to make changes in the internal environment. The organizations are going through tremendous changes, developing the environment, where all employees could contribute their best, where the expectations of the customers are exceeded. The organizations consider efficiency, quality, productivity and customer satisfaction as the critical success factors.
Framework for analysis
SWOT- SWOT analysis well known as the internal analysis usually stand for strength, weakness, opportunities and threats. This strategic tool involves the analysis of both external and internal environment. The outcome of the analysis helps the firms to determine the strategy to determine the strategies they need to implement. The strength of SWOT gives the confidence about the factors that the organizations got right and which it could capitalize on (Yuan 2013). Likewise, the weakness indicates the areas that company needs to pay attention. The opportunity informs the company about the available scope for the development and growth of the business. Lastly, threats determine the significant threats for the organizations. These threats could be both internal and external.
SWOT assisting the firms in decision-making process
This strategic tool helps the firms to learn whether it follows appropriate marketing mix strategies or it has large market share, which increase the strategic capability of the firm. Based on the market share, the firm could develop its products. Similarly, the weakness determines whether the firm has required capital or it is using the resource optimally. Based on the availability, the new strategies are developed. The threats highlight the fact that whether there is an increasing competition in the market. For example, if the organizations lack the ability of cost control, it might lose the profits.
Macro economic factors influencing the business and the organizations
- Demographic forces
- Economic forces
- Natural resources
- Technological factors
- Political and legal forces
- Cultural and social forces
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