Understanding Business For Small And Medium Enterprises

Explaining why environmental analysis is so important

Discuss the Understanding of Business for Small And Medium Enterprises.

Task I

Explaining why environmental analysis is so important

Environmental analysis is defined as a process through which organisations analyze both internal and external factors to find out their impact on performance (KleiböHmer, 2001:46). For this reason, firms through environmental analysis comprehend the activities taking place both outside and inside their industry (Analoui and Karami, 2003:56). Besides, through environmental analysis, an organisation identifies its threats, opportunities, weakness and strengths. Ideally, environmental scanning helps organisations in identifying their strengths, weaknesses, opportunities, and threats. Accordingly, it helps them in optimum utilization of resources, growth, and survival as well as in planning their long-term strategy (Radojević, and Bashkin, 2006:56). Environmental scanning also helps organisations in making informed decisions based on the challenges they are being subjected to in their respective industries.

Three Political- Legal Factors and Three Socio-Cultural Factors Which Are Specific To Organic Foods UK and Explaining How Each Will Impact on its Success

Political-Legal factors

As a constitutional monarchy, the United Kingdom is influenced by the parliamentary system.  For this reason, the country is politically stable and provides Organic Foods UK with a perfect environment to conduct its business (Zhang, 2007:64). Another political factor that exhibits a significant impact on the success of the company is the low-interest rates that characterize the UK market. With the low- interest rates of approximately 0.5%, Organic Foods UK can take a loan from various financial institutions in the country and banks to expand its operations and consequently its customer base (Zhang, 2007:68). In addition to these political factors, the company has to deal with the country’s complicated legal system. For instance, the company is forced to adhere to both the European Union and the UK law, making the whole situation a bit complex and expensive for the firm.

Socio-cultural factors

Various cultural and social transformations are being experienced in the UK, and they might affect the success of Organic Foods UK both positively and negatively. One of the significant changes in the UK market is an aging population. The aging population is an opportunity for Organic Foods UK because it can produce foods that target this market segment. Besides an aging population, the UK market is defined by individuals from distinct cultural backgrounds. This is somewhat challenging for the company because it has to broaden its product portfolio to meet the diverse needs and tastes of individuals from distinct cultural backgrounds. It is up to the company to employ individuals from diverse cultural backgrounds to enhance its competitiveness in the industry. Another socio-cultural factor that might affect the success of the company is the increased and high dependency ratio resulting in the decline of consumer disposable income.

Three Political-Legal factors and Three Socio-Cultural factors which are specific to Organic Foods UK and explaining how each will impact on its success

Task 2

Three Stakeholders of Organic Foods UK

Stakeholders according to Weiss (2009:15) are individuals, organisations, or groups that have an interest in the company affairs. Organic Foods UK has two types of stakeholders: Internal and external stakeholder. Internal stakeholders include employees and shareholders, and external stakeholders include the government, creditors, suppliers and partners, and communities. However, this part will primarily focus on analyzing three stakeholders including the government, the community, and the customers.

The Community and the Government

Organic Foods UK conducts its operations within the local community, and their activities affect them in significant ways. The government expects the company to pay taxes whereas the community requires them to conduct their operations in an ethical manner as well as ensure that they do not cause any harm to the environment. The community also expects the company to take part in charitable giving and local events. Apart from paying taxes, the government makes crucial decisions that might affect their operations in the community. It is, therefore, imperative that the company employees maintain an excellent relationship with the government as well as local officials to foresee any regulatory changes or any developments in the community that might affect their operations.

Customers

These stakeholders are essential in determining the success of an organisation.  Organic Foods UK must comprehend that generating, attracting, and retaining a loyal customer base is critical in determining their success in the food industry. In fact, if customers fail to purchase the company products, it is evident that the company, its retailers, and suppliers would fail (Friedman and Miles, 2006:32).

Two Examples of the Above Stakeholders Needs and Wants

The needs and wants of the above stakeholders will be done based on stakeholder analysis map. Stakeholder analysis is defined by Sharma and Starik (2004: 12) as the systematic way of analyzing stakeholders based on their interest and power. The key players are the high- interest stakeholders whereas the least important stakeholders are the low- interest and low power stakeholders. The community and the customers fall under the low- interest stakeholders whereas the government is classified under high-interest stakeholders. For all these reasons, their needs and wants significantly differ. For instance, customers want quality service and easy access to high-quality services and products, but at a competitive price. The community, on the other hand, wants a clean environment and an organisation that is a good corporate citizen. Besides, the government needs the organisation to provide its citizens with employment opportunities and pay taxes. Based on these needs and wants, Organic Foods UK must address, comprehend, and define the needs of all its stakeholders. Schermerhorn (2009:23) notes that organisations that are performing well are those that are satisfying the needs and wants of their stakeholders.

Three Stakeholders of Organic Foods UK

Table 1: Stakeholder Analysis of Organic Foods UK

Interest

Source: Sharma and Starik (2004:15)

Task 3

Three advantages of Organic Foods UK using Divisional Structure

Lewis (2007: 332) defines divisional organisation structure as a structure that is characterized by distinct parallel teams channelling their attention on a single service or product line. Given the fact that Organic Foods UK is in pursuit of diversifying its product line to include Smoothies, Juices, and organic products, this type of organisation structure will be crucial for the company. Some of the benefits of adopting the divisional organisational structure are as detailed below:

Easy assessment of divisional results

Through the structure, each division will have different activities to perform depending on their product line. In this case, it will be easier to review the milestone achieved by the new products based on losses or profits. As per the findings, the company will either decide to continue with the production of the newly introduced product in the market or completely stop its production.

Creation of Division Heads

The organisation structure will compel the company to assign a manager for each product division. It is then the responsibility of the designated manager to control all the functions related to financing, production, advertisement, sale and purchase of the products (Lewis, 2007: 345). This strategy will help the company in the development of competent skills in each product division.

Enhanced expansion process

Divisional organisational structure promotes the independence of each product division in the organisation. Since the company wants to diversify its product line, it will be easier to expand its product line because the existing products will not be disturbed by the launching of the new ones in the market.

Two Effects that a Divisional Structure could have on the flow of information

As per the above discussion, it is evident that the structure being adopted by the company will result in various departments operating independently. As a result, the interaction between departments will be very rare. This is attributable to the fact that staffs within each unit interact on a continuous basis with the aim of developing expectations and communication standards.  As such, the communication methods employed by various departments significantly differ. For instance, one division might rely on email to send and receive information whereas other units prefer phone discussions and in-person meetings. Therefore, when the organisation mandates communication between the units, the distinction in communication methods become an obstacle. Daft, Murphy and Willmott (2012:110) note that communication breakdown leads to work redundancy, workflow problems, and delayed distribution of valuable information.

Two Examples of the Above Stakeholders Needs and Wants

Task 4

Why mechanistic or organic structure would be the most effective organisation structure for Organic Foods UK

Mechanistic structures are suitable for companies that conduct their operations in an environment that is stable, preserves high loyalty when it comes to management and utilizes a centralized approach in guiding employees and operations (Daft, Kendrick and Vershinina, 2010: 83). Mechanistic structures do not require organisations to adapt or transform their structures because creativity, innovation, and rapid analysis of decisions made are not needed.  Mechanistic organisation structures are prevalent in universities and colleges. The primary attributes of this structure include adhering to management instructions and low differentiation of activities. Its emphasis is in accomplishing the assigned tasks rather than realizing the organisation goals. Besides, control and communication follows a hierarchical path and is rooted in the belief that effective decisions are made by the top management (Harrison and St. John, 2010:56).

Conversely, organisation structures are utilised by companies operating in environments that are unstable. For this reason, these companies must be ready to transform accordingly. Besides, they must be capable of processing, analyzing, and distributing knowledge and information promptly to enhance their competitiveness in their respective industries (Chermerhorn, 2010:83). Organisations using this type of structure are expected to communicate swiftly and effectively by distributing information across the organisation. Information distribution is done by the distinct functional areas and departments that are closely integrated. The structure also advocates for the implementation of the decentralized decision-making process to allow employees at the bottom hierarchy to contribute to the course of making decisions in the organisation. Ideally, this organisation structure permits the application of participative approach with the aim of making employees feel empowered and in turn lead to improved problem-solving abilities and greater creativity (Gitman and Mcdaniel, 2008:35). The main attributes of organic structure are an extensive network of communication, control, and authority; enhanced problem-solving abilities among employees; it is goal oriented instead of task oriented, and it encourages the empowerment of employees. The table below highlights the differences between organic and mechanistic organisations.

Table 1: Differences between organic and mechanistic organisations

Source: (Daft, Kendrick and Vershinina, 2010: 93)

Based on these differences, the application of the above organisation structures would be the most effective for Organic Foods UK because of varied reason. For instance, the use of mechanistic structure will ensure that the organisation decisions are made by the top management in regards to the diversification of its product line; information dissemination is based on organisation hierarchy; specialization of task is emphasized; change is uncommon, and departments operate independently. Equally, the use of organic structure will enable the company to integrate its departments and functional areas to enhance the free flow of information. Rapid dissemination of information increases the company ability to react to transformations in its external and internal environments.

Table 1: Stakeholder Analysis of Organic Foods UK

Using Four Contingency factors to support and justify my answer

Contingencies refer to those factors that enhance one approach to be favoured over others by managers (Clegg, Hardy and Nord, 2006:115). Examples of contingency factors that support or justify my answer include political contingencies, size/age contingencies, technology contingencies, and environment contingencies. The UK market is stable, hence the need for the organisation to adopt mechanistic structure. In regards to Age/size contingency, it is evident that the organisation is at its maturity stage and in need of creating separate divisions. For this reason, the organic structure will be sufficient for the organisation operations. Technology contingency helps in supporting a more decentralized structure.

Task 5

Using Kurt Lewin’s Three-Step Model To Discuss Three Ideas Regarding How To Bring Cultural Change To Create A More Positive Culture

The three phases that characterize the above model include unfreeze, change and freeze. The following is a detailed analysis of each phase

Phase One: Unfreezing

This is the most important phase in comprehending the change process. It allows individuals to get ready for the change process. Organisation employees need to comprehend that change is inevitable, and they should be ready to shift from their comfort zones. Therefore, changing the culture requires the Organic Foods UK to inform the staff why the change in culture is necessary. For instance, the manager in charge of the change process should inform the staffs that absenteeism and lateness are affecting the productivity of the company, hence the need to change the culture regarding punctuality and employee absenteeism. Besides, the staff should be given an opportunity to weigh the costs and benefits of the change process.

Phase 2: Transition or Change

According to Needham and Dransfield (1990:65), change is a process and not an event. The second phase results when the needed changes are implemented in the organisation. Employees are unfrozen and start operating based on the new culture. However, this face is defined by various challenges such as employees being fearful or unsure of whether to accept or resist the change process. Given the fact that employees are still getting used to the changes being made to the initial culture of the organisation, it is important that they are given adequate time to comprehend the changes made. Additionally, the organisation should provide them with the necessary support inform of coaching, training, and accepting error as part and parcel of the change process (Stankard, 2002:63).

Three advantages of Organic Foods UK using Divisional Structure

Phase 3: Freezing

Also known as refreezing, its aim is to enhance stability after the implementation of the changes in the organisation is successful. At this stage, employees accept the changes as their new way of conducting their operations in the organisation

Three ways in which Staff might resist this change

Resistance to change to the organisation culture is inevitable. According to Murray et al. (2006:45), organisation management considers resistance to change as an ever-evolving and complex issue facing today’s organisations. The change process is ubiquitous, and resistance of employees to the change process significantly contributes to the failure of well-conceived and well-intended efforts to implement necessary changes. In this context, there are three ways in which staff might resist the change that Organic Foods UK intends to make to its culture in regards to staff absenteeism, punctuality, and productivity. These are employees refusing to channel their time in learning the changes made to the existing culture; failure to attend meetings to talk about the changes made to the culture; and excessive criticism and fault finding (Athak, 2010: 65; García-Cabrera and García-Barba Hernández, 2014:450).

Task 6

Ways to improve internal communication between warehouse staff and the office

According to the warehouse staff, they are not often informed about the performance of the business resulting in them feeling isolated. To address this issue, Organic Foods UK can utilise the PDCA cycle to enhance its internal communication process.  As a four-step model, the plan-do-check-act cycle is important for carrying out the change process in the organisation such as changes to the organisation internal communication process. The following is a detailed analysis of how the organisation can use this model to enhance its internal communication.

Plan: In this stage, the organisation needs to analyze its internal communication process and find out if all departments are informed regarding the activities of the company. Therefore, the organisation needs to identify a purpose or goal such enhancing communication within the organisation

Do: In this step, the organisation needs to implement the strategies that will enhance internal communication. Examples of these strategies include encouraging information sharing among organisation staff via an online platform; creating an open dialogue where staffs can update themselves on the plans, progress, and changes in the company as well as strengthening connections between the management and employees (Aquinas, 2010:85).

Check: In this step, they should monitor the outcomes of the communication strategies to identify areas that need further improvement or whether warehouse employees are now up-to-date regarding the activities of the company.

Act: This step finalizes the adoption of the communication process and making significant changes to the already existing ones.

Task 7

Four ways in which the company could utilise IT to enhance business productivity

For Communication Purposes

Organic Foods UK can use technology to enhance its communication with customers. For instance, organisation employees can use cell phones to stay in touch with customers and respond to their queries instantly. Additionally, employees can have easy access to a variety of business applications, emails, and the internet. The company employees can also use social networking sites, text messaging, and emails to connect with their clients and boost internal communication with employees, especially warehouse employees who feel disconnected from the activities of the organisation(Basu, 2004:36).

Improving Customer Service

Through technology, the company will be in a position to communicate directly with its existing and potential customers. For instance, the company can use email to respond to customer questions, provide customers with various means to contact it, and provide online help for client’s visiting its website.

Marketing

The company through information technology can easily reach both existing and new customers. Through internet marketing, the company can reach its target market by advertising on various search engines, informational website as well as sell products online (Young andHinesly, 2014: 428). The company through information technology can utilise email marketing including business updates, coupons and newsletters to reach a larger customer base. Likewise, the company can utilise mobile marketing to acquire a larger customer base and advertise its products via advertising and text messaging. Accordingly, it can offer its target market branded applications that connect customers to the business activities and events in an entertaining and fun way.

Building the brand

The company can use information technology to build its brand because brand recognition is the most significant aspect of competitive advantages. The company through information technology can build its brand by being active in the social media by engaging followers and .generating content.

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