Business Environment means all the internal and external constituents that have great impact on all aspects of business. These factors not only have effect on organisation but it has great effect on employees, customer, management, supply and demands of companies products and services, and regulation that are framed by enterprise. Macro environmental factor have great impact on the success and growth of firm. Some of internal business factors are resources, capital, workforce, management, business process etc. External business environment factors are Political, social, legal, technological, environmental, and economic elements. Macro environmental factors have effect on Whole business and they are uncontrollable in nature. Micro Environment have effect on some particular business-to-business activity and such variables can be controlled through effective strategy.
The report will conclude the explanation about different types of organisation and their legal structure. It will have focus on determining the positive and negative impact of macro business environment factors on business .This can be identified in context of marks and Spenser company.
P1 Purpose of the organisations
Private : Marks and Spencer
The purpose of Marks and Spencer is to satisfying its customers by providing them an efficient range of clothing, basic assets and accessories of home, along with a huge range of food products. The organisation ensures the standard and best quality of these items so that the customers can feel satisfied enough with the brand (Wilson and Beard, 2014). The organisation has a flat legal organisation structure which has maximized the individual roles and responsibilities of the employees and their departments as well.
Public : Primark
Primark is a subsidiary of AB foods. Along with it, the organisation deals with the clothing, accessories and general home accessories. The purpose of Primark is to satisfy its customers by providing them an efficient and standard range of the food items and the households as well. The legal status of the company got affected when a supplier is being told to remove the stickers and branding of it from the stores of Primark.
Voluntary : Cancer Research
The purpose of this organisation is to provide support and care to the people suffering from Cancer. Also, providing efficient services and treatments to the people suffering from Cancer so that they can be treated well and recover as soon as possible (Faulkner and et.al., 2014). Although the treatment of Cancer is very cost effective but Cancer Research provides free treatment to the patients. The legal status of Cancer Research was being standardised with the secretary of health and state (Grant,2016).
P2 Size and Scope of M&S
The size of Marks and Spencer can be considered as the structural property which includes some other essential factors as well such as the number of employees, market shares and the employee turnover etc.
Number of employees
Marks and Spenser is a family of 82,000 employees including the staff, employees, and authorities. Around 64000 people are working in retail stores of Marks and Spenser.The organisation also have outlet globally.
Gross annual turnover
Although it is quite tough to get the exact and appropriate turnover rate. The company faced turnover because of some reasons such as the employees may not be encouraged that much because motivation plays a very important role as it helps in maintaining the focus towards the work, thus it can also help the company in achieving higher targets. As analysed, the turnover rates have been increasing from December 2015. In December 2015, the minimum rate observed was 1.5 % and now it has increased to 2.9%. It has been observed that the company is facing the issue of gross turnover from December 2015 (Islam, 2016).
Market Shareholders The market share is also a very essential concept that helps in maintaining the overall statistics of the company. So, M&S has developed a pricing strategy which the company uses at the time of any decrements. It can be considered as an essential concept that when the situation of the market changes, the company starts a new strategy as well. So, the company cannot face a complex situation for a longer time as the company has already prepared various strategies according to different situations which can help the organisation in maintaining the market shares in the market place. The organisation has 1433 retail outlet worldwide (Van Wormer and Besthorn, 2017).
P3 Relationship between various function within M&S for achieving organisational mission and objectives
The mission of Marks and Spenser is to produce inspirational quality of products that are easily accessible to customers.
The main objective of Marks and Spenser are:
Employee orientation – The organization has higher expectations from Employees. The enterprise expecting that workers can contributes to business activities. There is a requirement of succession management. As such developing a career path for employees. It’s part of Mark and Spencer principle to attract, motivate and retain highly talented workforce to assist the transformation of the business and deliver improved performance.
Organizational objectives - Mark and Spencer is to retain their leadership in clothing and specialty food. This is to be achieving by translating their scale and authority into superior quality, value and appeal.
Sales objectives - Mark and Spencer belief that there is plenty of area for improvement in their sales.
The various functional departments in organisation are-
Marketing department- This department function is to promote companies brand, product and services. Their role is to assist business entity in expanding their business and enhancing growth. This divisional unit helps firm in achieving their marketing objectives such as increasing market share, enhancing market growth, raising sales etc.
Customer service support-Their function is to interact with customer solving their query, handling their complains etc. All these activities performed by customer support department assist organisation in gaining customer loyalty and enhancing brand image in the market .It allows enterprise to maintain healthy relationship with customer and provide business entity an opportunity to attract more number of consumers.
Sales department-This functional department plays significant role in success of business. These departments are responsible for generating revenue. There task is to ensure that sales of goods and services are resulting into profit. This functional division coordinates with marketing division in order to assist them in generating brand awareness, introduction of product in market etc.
Accounting and finance department: They are accountable for conducting various activities such as maintaining accounts, planning, organising finance for organisation. Their main task is to produce financial statement for business. Accounting and finance department core function is to maintain and manage cash outflows and inflows in order to assist firm in fulfilling objective of increasing profit margin and enhancing growth.
Distribution department-These functional departments is accountable for receiving and delivering order to customers at the right place, right time.
Research and development department-This functional unit act as catalyst in innovation. Research and development department is accountable for innovating, designing products. Their main task is to identify various ways for developing and designing goods according to the economic, social and technological trends.
Administrative department-The administrative department is responsible for handling and managing business activities. They are also involved in various decision making and financial review process. Administrative department coordinates with other department to ensure smooth flow of information between different departments. It helps business entity in increasing their operational efficiency.
Production department-The function of production department is to convert raw material into finished good through series of production process. They are responsible for ensuring that raw goods are converted in finished product effectively and in efficient manner. Production department assists business unit in fulfilling their objective of customer satisfaction by proving good quality of products to their clients.
Operation department-This department is accountable for managing and controlling production process and activity. Operation department coordinates with production department and assist them in designing process.
Purchase department- This functional unit is liable for procurement of raw material, supplies, equipment and machineries. Their role is to ensure that right quantity resources, raw material and product that are used by production and operational department are available at the time when they are required. The purchase department helps organisation in fulfilling their objective of effective utilisation or resources and cost minimisation (Wheelen and Hunger,2017).
Figure 1: Functional department in an organization
Source: (Business Function chart, 2016)
P4 Identifying negative and positive impact of macro environmental factor upon M&S
Environmental factors are Economic, social, technological, legal and environmental factors. Examples of macro environmental factor are competitors, changes in interest rate,
Political Factors: Marks and Spencer company has been able to gain favoured from European Council Free trade agreement and has got an opportunity to reduce sourcing cost. But lack of clarity in UK government policies related to energy efficiency scheme has badly affected the Marks and Spenser initiatives.
Economic factors: The organisation is greatly impacted by discounting pricing strategy of its competitor. Due to this factor company has to face short term loss as customers were attracted towards quality with value.
Social factors: These factors have great impact on business strategy. It has become challenging for organisation to determine the need and demands of consumer. Social factors include various elements such as Trend, culture, value, belief etc. The positive impact of these factors is that increase in Population has lead to increase in demand for company products and services.
Technological factors: Online presence and use of social media has allowed organisation increase its profitability and revenue generation capacity. The negative impact is that increase in use of mobile commerce Platform has affected the firm profitability.
Legal factors: The legal policies of UK government have allowed company to adopt various marketing techniques and facilitate promotional activities for introducing their brand in market. Organisation has to face legal obligation due to its Decision of regarding withdrawing from EU market.
Environmental factors: The company has to face stiff competition in UK market this has allowed Business entity to establish their focus on improving the quality of products and services. The company has to bear pressures due to strict environmental laws (Wilsonand Beard, 2014)
P 5 Internal and external analysis
Swot Analysis -This technique can be used by Marks and Spenser for analysing its strength and weaknesses. This method will help Marks and Spenser in reducing threats and transforming weaknesses into strength. It will allow firm to explore and capture various business opportunities. This method direct organisation in making effective use of its strength and enable firm to increase its competencies.
Strength: Markers and Spencer is well reputed brand.
It is offering wide variety of product and services.
Organisation has large number of stores and retail outlet.
It is the most popular brand.
Quality of product.
Global expansion to foreign market.
Effective strategy in order to fulfil corporate social responsibility.
Stores are not attractive.
Use of traditional technology and ineffective method of working.
In proper management system.
Limited market share.
Opportunities: Expansion of business.
Produce innovative goods and services.
Company has opportunity to enter into global market.
Marks and Spenser have opportunity to introduce to new market segment so that it could generate more profits.
Company can develop its own websites and can mark it online presence as it will assist firm in reaching wide range of customer.
It has opportunity to simplify its operational model.
Organisation can adopt advance technology for producing goods and services.
Increase in competition.
As Marks and Spenser is operating its business in global market various political, legal and economic factors may have great impact on its profits and growth.
Strategies And Policies adopted by competitor for gaining competitive advantage.
Government policies for retail stores.
Strength: Highly effective strategy adopted by organisation for fulfilling the corporate social responsibility has helped firm in increasing sustainability and has provided organisation an opportunity to gain competitive advantage in market. This activity has assisted business entity in changing customer perception. Effective strategy has positive impact on society and enables business entity to enhance their brand image. This activity has provided business entity an opportunity to differentiate their brand from that of competitor.
Newly introduce trend has allowed organisation to communicate their perception and promote the concept of healthy food among consumers (Faulkner and et.al., 2014)
Global expansion: The global expansion strategy has provided organisation an opportunity to explore and new market opportunities. It has enabled M&S to take leverage its expertise in establishing their position in fast growing market. Online presence of company will help them in becoming multi channel retailer and it has allowed firm to reac wide number of customer. This has allowed business entity to identify the needs and demands of consumers and produce product accordingly. This has enabled firm in increase their sales and revenue.
Poor financial performance-The decline in business growth has great impact on company financial performance.
Organisation Reliance on UK market –As the M&s company was much dependent on the UK market for its growth and success the economic crisis in the country has great impact on the financial performance of organisation. Decrease in stock prices has raise question of its sustainability due to this the business entity has to suffered big losses. Product recall has great effect on company brand value. This has great influence on customer as well.
Ineffective marketing strategy-The M&S decision regarding expanding their business in China has proved wrong as the marketing strategy adopted by firm is ineffective. This is the reason of low market growth in market of china.
Ineffective expansion strategy and great impact of social factors- The company has made wrong decision regarding positioning their product in market. M&s has established there big stores in China market. As the China customer prefer to visit small stores for buying products and services. This factor has great impact on the firm profitability, growth and success.
Global expansion in foreign market- The organisation has opportunity to expand their business in global market. It has potential and advantage to conduct joint venture with international companies that are dealing in same industries. As this will enable firm obtain benefit of gaining competitive advantage in international market.
Online Presence- M& Spenser has an opportunity to mark their online presence using online platform as this will allow firm to reach its customer quickly. It will provide firm benefit to analyse the demand of consumers in market.
Reshaping their clothing segment-The organisation has opportunity to reposition products and services in new market segment. The company can also adopt new promotional strategies for promoting their goods in market. The firm can offer wide ranges of stylish clothing. It can introduce various discounts, offers this will help organisation increasing their sales and profit margin.
Simplifying operational model-The M&s company has potential and opportunity to restructure its business and operational model. As this will allow business entity benefit to increase its operational efficiency, profit and raise operational capacity. Restructuring process will allow firm to reduce its various cost. It will enable firm to establish their focus on core business activities. The company can reduce the number of launches as it will assist customer in indentifying the detail of new products and their prices.
Threat of new and existing competitors in the market.
There is a volatility of prices of raw products in the market
New and emerging legislations that are related to retail industry .
Economic recession in the country.
Emerging low cost retailers in the industry that are preferred more by consumers.
There is extremely high competition in the industry
This method can be used by organisation for identifying the impact of various macro environmental factors on its business activities. This model helps company in planning tactics in order to reduce the effects of various factors on its success.
Legal and Political Factors-The various political factors are laws and code of conduct related to retail industry. The various laws and regulation framed by UK government has greatly affected M& A and has caused it to fight hard so as to maintain its position and market share with innovative and aggressive strategies. The various laws that have effected M&S a lot are the regulation related to industrial and labour law. It has affected the organisational development efforts through labour law infringements in both its global initiatives and Domestic business operations.
Social factors- social factors include Consumer’s tastes, preferences and lifestyle changes have presented both threats and opportunities for M&S. Consumers in the UK market have the potential of being loyal to one brand and the quality of products. But the choice, taste and preference of consumer can change easily with a pricing strategy of organisation.
Economic factors-The economic recession in the country has badly affected the financiual performance of the company. But Decrease in foreign exchange rate has provided ttransactional benefit to organisation.
Technological factors- The retail industry in UK has faced fundamental technological changes. Changes as such are increase in the use of internet as a basis of online shopping store which widens the use of ecommerce in the industry. This has great impact on the profitability and growth of M&S. The company has adopted online technology for promoting their products and services in market. Adoption of technology has encouraged business unit to produce innovative product, differentiate their goods from thta of competitor and gain competitive advantage in market.
Environmental factors-Some of environmental factors include environmental laws, competition etc this has great effect on business day to day activities. M&S company has opt for environmental friendly and resources in order to eliminate any legal obligation on them. This has provided firm an opportunity to increase its market share and enhance brand image.
Figure 2: PESTLE Analysis
P6 Explaining the way strength and weakness is interrelate with external Macro factors
Management of M&S compares strength of the company with prevailing macro environment factors like economic, political, technology, social and cultural and then formulate strategic and operational policies. A little change in macro environmental factors have great impact on organisational success and growth. It has great influence of various decisions and strategy of organisation.
Economic Factors: Economic factors include change in interest rate, inflation rate exchange rate in the market. If business organization is financially viable and have effective pricing strategy , sufficient financial resources than changing in these rate will not affect the pricing and marketing strategy of the organization. AS M&S is operating in global environment it should always ready to face the challenges arises due to change in economic factors.
Political and legal factors: Political and legal factors includes legal rules and regulations, code of conduct and policies related to retail industry.. Changes in these legal policies affect the company to face these legal challenges. It is required by company to employ expertise and specialized employees.
Social and cultural: To face the challenge of changing social and cultural factors. A business organization should have good staff, viable financial resources and natural resources. Company should have strength of fulfilling consumer taste and preferences as per their demands which are based on their beliefs and value (Borkar, 2010).
Technological Factors: If company have strength that it can upgrade its existing technology with new technology than business unit can adopt changes in which comes in technological factors.
Environmental Factors: Every business organization use natural resources for providing product and services. It is essential for M&S to adopt effective strategy and innovation process as this will help firm in gaining competitive advantage in market (Islam,2016.)
It has been concluded from the study that both internal and external factors have great impact on the organisation growth and success. It has been analysed from the report that As M& S company is operating in global environment it has great impact of economic and social factors on their business operations.
It is suggested that the organisation is required to adopt various effective strategy in order to minimise the effect of these factors on their business.
Books and Journal
- Grant, R.M., (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
- Roig-Tierno, N., Huarng, K.H. and Ribeiro-Soriano, D., (2016). Qualitative comparative analysis: Crisp and fuzzy sets in business and management.
- Sekaran, U. and Bougie, R., 2016. Research methods for business: A skill building approach. John Wiley & Sons.
- Van Wormer, K. and Besthorn, F., 2017. Human behavior and the social environment, macro level: Groups, communities, and organizations. Oxford University Press.
- Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson
- Wilson, J. and Beard, C., 2014. Constructing a sustainable learning organization: Marks and Spencer's first Plan A learning store. The Learning Organization.21(2). pp.98-112.
- Faulkner, G.P. And et.al., 2014. Supermarket own brand foods: lower in energy cost but similar in nutritional quality to their market brand alternatives. Journal of human nutrition and dietetics.27(6). pp.617-625.
- Borkar, R. (2010) Flat Organizational Structure
- Islam, K., 2016. Can Ethical Business Strategy Influence Consumers’ Buying Behavior and
- Loyalty: Marks and Spencer PLC?. Case Studies in Business and Management.3(1).pp.38.
Components of a pestle analysis. (2017). [Online]. Available through: <http://www.brighthubpm.com/project-planning/51754-components-of-a-pestle-analysis/>