This assessment will cover the following questions:
- Evaluate the different types, size and scope of organisations.
- Show the interrelationship of the different functions within an organisation and how they link to organisational structure of McDonalds.
- Use examples to demonstrate both the positive and negative impact the macro environment has on business operations in McDonalds.
- Determine the internal strengths and weaknesses of specific businesses and explain their interrelationship with external macro factors of McDonalds.
Every business entity operating within an economy are influenced by the environment in which it carries out its functioning. Business environment of a company is composed of internal as well as external factors. In order to get competitive advantage, every organisation needs to take into account all the business environment elements so that business threats can be minimised (Bah and Fang, 2015). This enables a company to enter into new markets. The present report is based upon McDonald's which is a multinational corporation dealing in fast food and carrying out its operations across the globe. The other 2 companies that are considered are NHS and UNICEF. The assignment will describe about different organisations, their purpose, size, scope and legal structure. Also, it includes relationship between different organisational functions. Moreover, SWOT is conducted for internal analysis and PESTLE for external examination. The negative and positive impacts of macro environmental factors are discussed. Lastly, strengths and weaknesses of external factors is included in the assignment.
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P1. Different Types of Organisations
There are various types of organisation that exists within an economy. It is important to study all the types in order to ascertain which form of business structure should be adopted by an entity. In this regard, the various types of business entities are described as follows:-
1. Private Organisation
These can be regarded as enterprises which are controlled and regulated by a group or individual, free from governmental intervention (Brown, 2018). The main purpose of these entities is to earn profit. Hereby, services and products are offered by them to fulfil the needs and desired of people. The major areas in which private entities operate its business are regarded as hotels, tourism, retail, hospitals etc. For instance: McDonald’s is a private organisation dealing in fast food industry by way of its outlets spread across the globe.
Legal Structure: The legal structure of private organisations is explained as follows:-
(A) Sole proprietor: Such type of business is operated and run by one person who is the owner of business. The owner is solely responsible for liabilities of business. It is is easy to set up and starts with few legal requirements and capital. This structure is suitable for small businesses such as art studios, local grocery shops, small restaurants and hotels etc.
(B) Partnership firm: This is an entity which is owned and managed by 2 or more partners and is governed by a partnership deed. The partners jointly bring resources to the business entity and divide profits among themselves. They share roles and responsibilities and hold liability for business. These firms are generally acknowledged to be profit-oriented and aim at surviving in competitive business environment for long term.
(C) Corporation: It can be referred to as an entity which is comprised of a number of persons and doesn’t offer shares to public (Chang, 2016). These entities work for the purpose of maximizing the profits. McDonald's is one of the most well renowned corporations across the globe.
(D) Franchise: This is a type of private entity whereby the franchisor is engaged in sale of their rights and name to third party retail outlet run by operator referred to as franchisee. This model is adopted by a firm with a view to facilitate business expansion.
(E) Joint venture: Hereby, the operations of this entity are undertaken by two or more parties who agree to share ownership, revenues and risks of business.
2. Public Organisations
These firms are controlled and operated by government. The main aim of these entities is to serve the public by offering an array of products and services. The funding of such enterprises is done by way of IPO. The areas or sectors in which these organisations mainly operate are regarded to be education, communication, transportation, finance, healthcare and many more. The main purpose of these entities is not profit maximization but fulfilment of customer needs. Government holds 100% stake in these firm. For instance: NHS is a public limited company that is engaged in provision of healthcare services to people.
3. Legal Structure: The legal structure of public entities is defined as follows:-
(A) Local organisations: Herein, the controls and management of the entity vests within local government.
(B) State organisations: Such entities are controlled and managed under the supervision ofstate government.
(C) Central organisations: This are the enterprises which are owned, governed and controlled by central government (Charfeddine, 2016). NHS is one of the most reputed and renowned centrally owned public organisations across the globe.
4. Voluntary Organisations
These organisations are formed as a result of accumulation of some individuals for the accomplishment of a specific cause or purpose. The main aim of such entities is to work for social welfare by provision of services to members at nominal or no cost. These are not aimed at earning profits. The scope of voluntary entities is either national or international. For instance: UNICEFis a renowned international children fund created by UN in the year 1946. Its aim is to provide food and health care to children in different countries that are not able to afford it. the organization serves around 190 countries.
P2. Detailed discussion over various business organisations
The different types of organisations persisting within the confines of an economy vary from each other in terms of their size, scope, mission, vision, organisational structure and number of staff members (Charter, 2017).
NHS is UK based health service organisation formed in the year 1948.
McDonald's is an American fast food chain found in the year 1940.
UNICEF is a children fund organisation created by UN in the year 1946.
It operates in UK, Wales and Scotland.
It is located globally having 37,855 stores.
UNICEF help developing countries to build policies and provide services to children and families who lives in poverty (Hillary, 2017).
This entity is operating at a national scale, functioning within 25 European countries.
It is functioning at a global scale with presence in over 125 nations across the globe.
It is operating at global level with provision of its services in over 190 countries.
The vision of NHS is to develop partnership between patients and clinicians with a view to provide high quality service.
McDonald's vision to be world’s best Quick Service Restaurant.
The mission statement of UNICEF is to create a world where rights of every child are understood and met.
Mission of NHS is to improve health and well being of people.
McDonald's mission is to be preferred place of customers to eat.
The mission of UNICEF is to protect the rights of children (Appelbaum and et. al., 2017).
It follows umbrella structure which is governed by government.
A tall structure where authority flow from top to bottom.
It is governed by 36 members of executive board. It is flat structure.
Number of employees
There are total of 170,000 employees working within this entity.
The number of employees working in this company is 210,000.
It has over 2030 employees.
P3. Functions of McDonald & Interrelationship with Organisational Objectives and Structure
- Organisational chart
Organisational chart explains the structure followed in an organisation and it shows the relationship between one employee with another or employee with top management. This explains the line of authority and responsibility of each employee in an organisation (Hussin and et. al., 2017). McDonald follows tall structure which has many levels of hierarchy which is also called departmentalisation. The line of communication followed hereby is long and span of control remains with the top management only. This structure provides assistance to the respective corporation in accomplishing the goals and objectives within due course of time. In this relation, the layout of tall structure for McDonald's is given as underneath:-
1. Functions of McDonald's
In a business, there are different types of functions that together perform with a view to attain business objectives in a timely manner. The functions pertaining to McDonald’s are explained below:-
- Research and Development: This is a department that focuses on identifying the needs and wants of customers so that it can meet their expectations and satisfy them to gain their trust and loyalty (Kolk, 2016). This results in timely achievement of objectives of McDonald’s. McDonald's following tall structure, makes it difficult for research and development department to communicate with other departments directly, it needs to follow the structure which makes a long procedure.
- Production Department: The main function of this department is to produce good by converting raw materials and processing it to finished goods. This department is the most crucial function which fulfils the needs and preferences of customers by providing them high quality products (Nohria, 2017). This leads to timely production of food & beverage in McDonald’s and attainment of corporate goals and objectives.
- Finance Department: Thisdepartment communicates with other functional departments of McDonald’s to decide budget so that every department can operates its functions properly. Finance department decides budget for marketing, production, research and development, sales etc. The tall structure followed by McDonald makes it easier for this department to work towards achievement of goals.
- HR: This function is engaged in hiring, devising payroll system and recruitment of skilled people. Training and development is also stipulated by this function in McDonald’s.
- Operations: This function manages overall operations in McDonald’s and includes the different types of process going on within the entity. This functions aims at ensuring smooth flow of operations for attainment of organizational goals (Otoo and Drechsel, 2018).
2. Interrelation between functions
Every functional area in McDonald’s is directly or indirectly interrelated with one another. They provide support to each one in executing their operational activities which ultimately contribute in accomplishing their core objectives of respective departments.
- Production and Marketing: Production department is regarded to be the most important business unit for a manufacturing concern. It shares an effective relation with marketing department within the confines of McDonald's. It provides information to marketing regarding the product portfolio of corporation so that the respective department can devise strong promotional strategies. This would aid the entity in gaining the attention of large base of audience and retaining them for a long period of time in future. Such kind of interrelationship is largely associated with the tall structure of McDonald's. This renders assistance to the concerned fast food company in capitalising upon the interrelation, thereby attaining the organisational goals and objectives within due course of time.
- Marketing and Finance: Another example of interrelationship can be seen by analysing marketing and finance departments within a firm. In this relation, it is analysed that marketing department within McDonald's incur expenses for promotion and advertising of organisational offerings only within the constraints of funds allotted by finance department to this functional unit. This interrelation ensures that the promotional activities of the fast food giant do not exceed the cost beyond assigned funds. Finance department is also required to go through overall tall structure before taking decision as per their company policies. Thus, the interface between both these functional units ensure that the firm is able to inflate its reach among people by conducting effective marketing campaigns and plans. This implies the realisation of goals within predefined course of time.
Source: Interrelationship between Marketing and Finance, 2020)
- Sales and HR:
Sales department of an organisation is closely interconnected with Human resources department. It can be said that whenever sales team requires more workforce, they communicate this need to HR manager of the company. This makes the HR department hold a placement drive or conduct interviews within the organisation, to hire skilled and proficient employees for sales department. When this interrelationship is executed within the confines of McDonald's, the sales department gets new tactical, skilled and experienced professionals who can render aid to the concerned MNC in devising strong sales strategies. Also, here HR department is also required to go through their tall structure of their own department before hiring desired workforce. Thus, it is analysed that the interface between sales and HR departments provide guidance to McDonald's in staying within the constraints of tall structure and duly accomplishing the corporate objectives.
- Marketing and R&D:
The interrelationship between marketing and Research & Development department is centred around the NPD initiatives undertaken by an enterprise. The execution of all the stages of new product development procedure require close synchronisation between both these departments within the premise of McDonald's. In this regard, the product designing stage which is considered as the primary domain of Research & Development, may get benefited by research conducted via marketing department based on the features of offerings that are most desired by target audience. The interface between both these functional units is immensely crucial for a top notch company such as McDonald's for timely accomplishing its goals and inflating the existing market share.
P4. Positive and Negative Impact of Various Macro Environmental Factors On Business Operations
A company operates in both external and internal environment. The external factors are analysed with the help of PESTLE of McDonald’s, as follows:-
1. PESTLE of McDonald’s
- Political factors: It encompasses governmentalrules and regulations, foreign trade policies, labour laws, tax laws etc. (Prajogo, 2016).
- Positive impact: The current political stability of UK has a positive influence upon McDonald’s to increase its brand image by acting in the confines of politics of respective country. By gaining knowledge of the relevant political regulations, McDonald's can enhance its existing level of sales and revenues in upcoming time period.
- Negative impact: BREXIT is bringing instability in the business environment of UK. It has an adverse impact over the operations McDonald’s as it would lead to adversities in the form of inflation. This decreases the current level of sales as well as profits of McDonald's, thereby having a significant impact over the market positioning of this corporation.
- Economic factors: This includes cost of labour, interest rates, disposable income of customers, inflation, economic growth etc.
- Positive impact: The strong economic development of UK positively impacts upon McDonald to make use of the various facilities like communication, transportation, technology in order to achieve growth and facilitate efficiency in business operations (Quinlan and Griffin, 2019). By leveraging such advancements, the respective fast food company is able to come up with innovative food and beverages to cater to the needs and demands of people.
- Negative impact: The rate of unemployment within UK is 3.9% which has a negative impact over McDonald’s as the entity is not able to procure talented labour at low wages.
- Social factors: This elementincludes education level, culture followed, demographic factors, etc.
- Positive impact: The growing likelihood of people towards fast food products in UK tends to have a positive impact over the revenues and sales of McDonald’s. This enhances the share as well as goodwill of company at market.
- Negative impact: A large proportion of UK’s population is affected by obese and diabetes which restrains them from consuming fast food items and shifts their choice to healthy food products, which limits the market share for McDonald. To deal with this, the concerned firm can come up with healthy range of products that can cater to the dietary requirements of people.
- Technological factors: This includes the technological developments, advanced ways of production and distribution channels etc.
- Positive impact: The technologically advanced conditions of UK impact positively on McDonald to adopt advanced and updated technology, thereby facilitating stipulation of quick services and fulfilment of customer demands (Saleem, 2015). This assists the company to timely deliver the orders of customers, thereby gaining maximum satisfaction from them.
- Negative impact: The advance technology adopted by McDonald's increases its budget and cost of training and development cost which is required to provide knowledge to employees about the manner in which new technologies have to be used. Further, if such new technology do not lead to enhancement of business efficiency, it would lead to wastage of time, efforts and money for the company.
- Environmental factors: This includes sustainable operations, climatic changes, global warming, weather conditions, limited natural resources etc.
- Positive impact: This element positively influences upon McDonald’s and company focuses on maintenance of environmental balance by adopting CSR practices. This creates effective brand image of organisation and instils trust among the customers (Schaltegger, Hansen and Lüdeke-Freund, 2016). This leads to expansion of existing customer base for the respective fast food company.
- Negative impact: McDonald’s has failed to follow recycling standards, which implies extensive waste generation within premises and resulting pollution.
- Legal factors: Thisincludes a number of laws which influence business operations such as Consumer Protection Law, Health and Safety Law, Employment Law, Discrimination Law, etc.
- Positive impact: McDonald serves and offers goods and services by following health and safety law and maintains hygiene and cleanliness in its business operations which can be seen as the relative positive outcomes (Toedt, 2014). This reduces the chances of firm of getting indulged in law suites and thereby facing the potential threat of being publicly prosecuted.
- Negative impact: An instance whereby McDonald’s fails to abide by any of the laws within food & beverage sector, would lead to imposition of penalties and fines on company. This would have a negative impact over the goodwill and market share of the multinational.
P5. Internal and External Analysis of McDonald To Identify Strength and Weakness
Reviewing and scanning the environmental aspects on a regular basis is essential with a view to craft effective corporate strategies for long term sustainability at market place. In this regard, SWOT analysis has been done for 2 organisations, namely, McDonald’s and UNICEF with a view to gain knowledge of their internal environment and related aspects.
SWOT of McDonald’s
SWOT of UNICEF
P6. Interrelationship between Strength and Weakness with Macro Factors
The external factors affect the business operations of an entity and also influence its decision making.
1. Political factors:
- Strength: The stable political conditions of UK serve as strength for McDonald’s to expand its market share and increase the profits. Capitalising upon this, the respective concern is able to enhance its positioning at international scale.
- Weakness: BREXIT affecting the political environment serve as weakness for the fast food giant and hinder it from attaining desired level of profitability (Kolk, 2016).It restrains the firm from earning the desired level of revenues as well as profits.
2. Economic factors:
- Strength: Stable economic growth of UK serves as strength for McDonald and encourages it to increase its outlets and global markets share. With access to hi tech facilities, McDonald's is able to gain the attention of large base of people and retain them for a long period of time.
- Weakness: High cost of labour in UK prove to be a weakness for the organization, making it spend more on hiring of skilled personnel. This tends to reduce the profit margins for McDonald's.
3. Social factors:
- Strength: The preference of young age group of UK to go for fast food products serve as strength for company and aid them to organizational objectives in a timely manner.
- Weakness: Obese and diabetes stricken population within UK acts as the weakness forMcDonald and limits its customer reach.
4. Technological factors:
- Strength: The technologically advanced state of UK fosters McDonald’s growth and thereby the company uses Robot Waiters to serve its customers which brings efficiency in operations and attracts large number of customers. This aids the entity in expanding its existing customer base and market value, thereby inflating its scope of growth and development.
- Weakness: Adoption of advance and updated technology inflates the overall cost of operations for McDonald’s turning it into a weakness for the entity.
5. Legal factors:
- Strength: The approach of McDonald’s to abide by all the laws facilitates McDonald to increase its market share by catering to the needs of people in a legal manner. This reduces the risk of getting involved in legal issues and losing the goodwill that it has earned over the course of time.
- Weakness: UK leaving European Union leads to creation of legal issues which affects operations of McDonald’s, thus making it as weakness for the organization.
6. Environmental factors:
- Strength: McDonald emphasises upon adopting environmental friendly practices serves as strength for the organization and provides aid to it in building trust and brand image in minds of customers (Appelbaum and et. al., 2017). This makes the respective fast food enterprise gain support from local community, government and customers at market place.
- Weakness: The failure of McDonald’s to make recyclable products tend to act as the weakness for the respective company in relation to environmental factor.
McDonald’s strengths and weaknesses are interrelated with macro factors, helping the organisation to achieve profits. For instance: The strengths like brand image can help the fast food giant to face competition and remain competitive in market. Also, use of advanced technologies aid McDonald’s to come up with innovation in its products and services. Similarly, company's weaknesses such as lack of effective management makes it challenging to switch to healthy offerings, thereby, ignoring customer preferences and resulting in loss of customers in the long run.
You may also like to read about - Analysis of Business Environment - Sainsbury's
It can be summarized that organization size and scope depends on their purpose. Every business is having different purpose and scope. However, there are three basic types of organization that are public, private and voluntary. McDonald’s is a private business operating at global level. In company there are different functions like HR, marketing, finance, etc. each one performing various task and activities. They are interrelated to one another which results in attaining overall goals. McDonald’s strength is global presence, large customer base whereas weakness in high employee turnover. They can develop new products in beverages. Also, main threat is shift in taste of people.
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