INTRODUCTION TO BUSINESS ENVIRONMENT
A business is always surrounded with its internal as well as external environment that has huge impact on its functioning. Various factors that influences its environment influences a company’s operating situation to a large extent. Several stakeholders are there that are related to any business like suppliers, clients, competitors, employees and customers etc. Along with that, a business also gets affected through market, social and economic trends of the nations where it operates (Business environment, 2014). In the present report, there will be focus on range of different businesses with their ownership. For this purpose, the firm, ASDA is being taken which is one of the largest retail organizations in United Kingdom with having very high market share in retail food sales in the country (ASDA, 2013). In this report, the impact of economic environment on business will also be studied as well. Last but not the least, political, legal and social factors of ASDA’s business will be focussed as well.
LO 1 RANGE OF DIFFERENT BUSINESSES AND THEIR OWNERSHIP
Number of different businesses is there that are having their own kind of ownership. At the local level, business keeps in hands of single owner only who manufactures and distributes his products as well as services within the local boundaries of his nation only. However, in national terms, ownership of a business remains within the national area of a country. In addition to this, in terms of international business, trade is being done across different nations (Halbert and Ingulli, 2014). It goes beyond the boundaries of a nation and ownership exists in the hands of either the single owner of company or with other partner who conducts trade from that county only. In international business, trade happens among several countries by selling one nation’s products in another. On the other hand, in global business like in case of ASDA, the functioning is done in different nations like its marketing is done in one nation and production in some other country (Kew and Stredwick, 2005).
Along with that, various sectors are there through which business is done and they are private, public, not for profit as well as voluntary organizations. In private sector, individuals have the complete power in their hands and control the whole business. Major purpose behind this commerce is to earn higher profits and revenues by performing trade for its future growth and success. Along with that, another reason behind these firms is to maximise its market share by increasing its sales. In this sector, main type of ownerships that exists is sole trader, partnership, government agencies and worker cooperatives (Fernando, 2011). They can be explained by the following ways:
Sole trader – In this, individuals are the single owners who owns as well as responsible for the overall running of the business which includes people like hairdresser, painters etc. This is the reason, it can also be said that there is no major difference in between the individual and business. There is of restriction of registering the business in sole trader. In addition, he has the benefit of making his own decisions without any other’s interruption. The most advantageous side of sole proprietorship is to enjoy 10 per cent profit with him. In contrast, one of the major disadvantages of it is that the sources of finance are very limited for the purpose of raising funds (Pujari, 2014).
Partnership – It is always in between two or more people who run business with having particular percentage of ownership which depends on the terms of their contract. In this, responsibility as well as the profits which company gains is shared among partners along with the losses too. Main demerit which is there in partnership is that of disagreement between partners at the time of decision making. It is mainly done in professions like accountancy and law. Firms in which there is partnership, authority to take decisions is with every one, however, to consult with others is equally important (Faul, 2008).
Private limited companies - The private sector limited companies are owned and run by its shareholders in accordance with the Memorandum of Association. In these organizations, ownership is in hands of the shareholders as they purchases the shares of the company and takes dividends at the time of profit. In this, generally there is no interference of government as owners are the only one who makes decisions. All the policies are made by private individuals only as per their convenience. ASDA is also one of the private retail organizations which formulate all its policies and rules for its stakeholders as per it feel like to be necessary to follow so as to earn highest profit along with high goodwill (Whitington, 2013).
Public limited companies – In public limited companies, government is the one who takes major decisions regarding firm and its business as it owns maximum shares of it. All the important judgments about functions of the company are taken by the regulatory bodies of the nation only. In this, shares are generally open with the public and if ay individual ants to run business with it, he has to take franchisee for that in which he would need to use its name by paying a corporation for making joint business decisions. Main purpose behind public sector is to serve the society with superior quality services or the welfare of them by charging very cheap price that can be affordable to each category of the society (Wetherly and Otter, 2011).
Non profit sector – Firms that comes in this category are different from both private as well as public sector as neither the government interferes in it, nor is the motive to earn profits. These organizations run for the welfare of people by using their earned money in fulfilling the goal of business. Most of the time, it is not privately owned as it has controlling members. Whatever profits thee firms earn, it converts into future plans for expansion or self preservation (Capon, 2009).
ASDA is having various stakeholders with it who have their direct influence on the organization. Company takes various initiatives in order to satisfy and keep its employees happy as they are the one which directly face the customer for the purpose of selling their products. In case, it these employees would not deal with the customers in an efficient manner, it may have an adverse impact on them which will ultimately affect profits of ASDA. To keep employees efficient enough so as to interact customers in such a way they will purchase the product, company used to provide them various training and development sessions through which their grooming can be done (Shaikh, 2010).
Likewise, to keep customers happy is equally important as if they would not be satisfied for what they get from the company; they will not buy the product again which will be a loss for ASDA. For this purpose, company is providing superior quality goods to people so as to make them satisfy for what they are spending. Along with that, company is giving due consideration to its shareholders too by providing them fair returns on their investment so as to make them stay with the firm in a long run. In addition to this, ASDA is taking care of the needs and expectations of its suppliers also by paying them amount which they desire in against of the material which they provide to the company (Riahi‐Belkauoi and Picur, 2000). For the organization, it is necessary to keep them happy as if it will not do so they would switch over to other firms which may lead to huge losses for the organization.
LO 2 WAY IN WHICH BUISNESSES ARE ORGANIZED TO ACHIEVE THEIR PURPOSES
Every firm is having its own organizational structure in which basically there are three major types which are like functional, hierarchical and matrix. ASDA is also having its own structure of organization. These are like:
Functional structure – In this type of organizational structure, there are separate divisions or departments for all functions like marketing, sales, human resources, finance etc. In ASDA also, this organizational structure is being followed. Here, employees are guided and directed through their respective head of the department regarding their work activities. For the performance of personnel, every head of his division is responsible. Work and duties are assigned to people in accordance with their skills, expertise and knowledge in this structure. In this structure there is narrow span of control (Boyd and Begley, 2002).
Hierarchical structure – This organizational structure tells about the hierarchy of company in accordance with the designations of employees from top level to the lowest level. In this organizational structure, complete power and control is in hands of the owner of firm only who makes all judgments for employees and communicate to them. The span of control is very broad in it as in this close supervision is not there. Every level in the hierarchy is having different level of authority along with its line manager who commands and controls his respective level of hierarchy. In this, mainly communication across various sections is poor especially in case when there is horizontal flow of information (McGuire, By and Hutchings, 2007).
Matrix structure – Matrix structure is the one which is having the characteristics of both functional as well as hierarchical organizational structure. Under this structure, most of the time, teams are being made by taking employees from different departments so that particular goal can be achieved from the expertise of people who are specialized in different areas. With the help of this organizational structure, advantage of strengths of employees can be taken and their weaknesses can be removed after analyzing that when they work in a team. Here, project managers are the one who have control and supervision over them with narrow span of control (Khan and Bhatti, 2006).
As ASDA is following functional organizational structure, various departments are there which has their own purpose for that they are running. Main division of the organization is of marketing which is responsible for making employees understand the actual needs and desires of the customers so that right product can be developed for them in the right way. In addition to that, for setting the right prices which will be acceptable as well as affordable by the customers is also known through this department. ASDA get the advantage of promoting its products through marketing as it helps in knowing the way by which people can be attracted and their attention can be captured (Ueng, Wells and Lilly, 2000). Through it, market research for the new product development can be also being done as well.
With the help of human resource department, right employees at the places where they should be placed is decided that helps in satisfying the needs of the customers with optimum services. Major purpose of this department in ASDA is to retain employees with their own willingness and satisfaction so as to take advantage of their skills. On the other hand, if it would not do so, human resources of the company would not get satisfied which will ultimately lead to increase in their turnover ratio (Grönroos and Helle, 2010). With this, ultimately the goodwill of organization would get affected and company would lose its existing customers. Another main purpose of human resource department is to ensure that the company is having adequate amount of material so as to meet the objectives of organization. It is done with the perspective that productivity of the company would be increased through efforts of effective and efficient employees (Aziz and Fady,2013).
Likewise, other departments of ASDA like finance, sales and production also work for achieving some particular objectives which ultimately aligns with the common goal of the firm. Finance department aims at ensuring whether sufficient amount of funds are available in organization or not and if necessary, it searches for the right sources. On the other hand major purpose behind production department is to manufacture superior quality products with minimum cost and optimum utilisation of resources. Also, sales department plays a significant role in attaining higher profits in the firm along with increased revenues so that further investments can be made for future growth (Bakewell, 2001).
Strategic planning is that process in ASDA which determines the future of organization in the coming future over next years. Focus of the strategic plan is on the entire organization depends on the nature of leadership and culture that firm is following. ASDA’s mission is to become the best retailer that will exceed the customer’s needs and expectations. Its main purpose is to manufacture those goods and services which will be affordable and acceptable by everyone. Various values are there that ASDA keeps with it in order to make its business a huge success with a rich brand image; it involves respect for individuals and striving for excellence along with quality services to the customers (What is Strategic Planning?, 2014).
LO 3 IMPACT OF ECONOMIC ENVIRONMET ON BUISNESS
ASDA is performing its business in many nations and people in every economy get influenced through economic condition of the nation which affects the company as well. Demand and supply of goods and services totally depends on the economic condition of a country. Flow of money in a nation is also justified through its economic environment. Al the factors of an economy can lead it either to develop the country or to restrict its growth. Various laws of the government are there which are imposed by the regulatory bodies so as to make stability in the economic environment of a country (Pujari, 2014). There should be stability in economic environment of nation as only through this, ASDA can decide the type of goods and services that has to be produced.
With the help of this only, it can be decided whether high tech methods should be used or not. It will also state whether everyone is getting an equal share or not. It is important to consider these factors by ASDA as if it would not do so there will be chances that the supply of goods becomes low or may be the target customers would not be able to afford that. If an economy in which ASDA will operate its business would be unstable, it may lead to shortage of services and goods and loss of jobs as company will not be in position to pay more employees (Business environment, 2014).
Similarly, if there will be changes in the economic environment, ASDA will have to make various decisions like what to produce, how to produce and for whom to produce which would require a long time to make plans and in their implementation. Company will have to decide over costs and supply of the raw material with improvements and upgrades on technology. These decisions will also impact prices and other strategies of competitors by which ASDA can take its advantage and gain the loyalty of customers. Through changes in the economic environment, company would also have to make transformation in its needed resources like capital, equipment and labour etc. Along with that, in order to make decision for the people for whom products will be manufactured by ASDA, present and potential customers will be determined as well (Halbert and Ingulli, 2014).
When there is period of growth in the nations where this retail organization has operated its business, ASDA can perform its business in more constructive way as in this scenario, it can use latest technologies by which it may decrease its costs and would increase its revenues. These periods will also help in retaining its employees as firm will be in position to pay higher salaries to its people. However, when there is period of inflation in the country, there will be rise in the overall prices of the products and services that is generally the result of growth phase and then the recession comes when inflation slow down. On the contrary, when prices decrease mainly in harsh situations, deflation comes when everything becomes cheap (Kew and Stredwick, 2005). All these phases determine the labour cost which plays a vital role in ASDA quality of them determines the quality of products and thus the level of profits.
LO 4 IMPACT OF POLITICAL, LEGALAND SOCIAL FACTORS ON BUISNESS
ASDA gets highly affected through political, legal and social factors as it performs its business in different nations in which there are distinct laws, rules and regulations that are imposed by the regulatory bodies of the country. Whenever there is any change in policies of government in any nation, ASDA is also required to change its set of rules so as to save itself from any risk and for sustaining its business with long period of survival (Fernando, 2011).
Along with that, there are also legal impacts on the business of ASDA as it has to follow all rules imposed through government of the country in which it has operated its business so as to prevent itself from engaging any fraud, illegal or unethical activity of which competitors can take the advantage and government can take any strict action against these unfair practices. For this purpose, ASDA manufactures all its products with high standards of quality so that customers can be satisfied in an ethical manner. Along with that, it treats its employees in a fair way without any discrimination on the basis of their caste, race, religion or disability (Faul, 2008).
In terms of social factors, ASDA is facing issues in recruiting right people for the job in its respective stores as many of them are unskilled. Along with that, it is also taking various initiatives so as to fulfil its corporate social responsibilities as through it, it can increase is goodwill as well as can earn the loyalty of customers towards it. For this purpose, it is doing charities in several institutions for the education of children who cannot afford it which is ultimately providing it the benefit of rich brand image in the market and so as increased market shares (Whitington, 2013).
From the above report, it can be concluded that ASDA is one of the highest profit making retail firm in UK which earning high revenues that can help it in doing further investments for the future. With the help of providing due consideration on political legal and social factors, it is saving itself from any risk that can go against it and can give advantage to its competitors. Last but not the least, with the help of analyzing its economic environment and fulfilling the needs of various stakeholders, company is gaining the benefit of high goodwill in the market by which it sustainability as well as survival ensures (Wetherly and Otter, 2011).
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