Business and Business Environment consists of factors that impacts business operations of different types of organisation such as private, public and voluntary. It is important for the management to deal with fluctuated factors by conducting analytical tools such as PESTLE. As a newly appointed client manager of JP Morgan finance and investment, you are asked by the CEO to define three kinds of organisations in London that may approach you for a loan or mortgage.
- Explain different types of organisations along with their size and scope.
- Explain the roles of different departments of Aldi and their interrelationship towards achievement of organisational goals and objectives.
- Assess the impact of internal and external business environment on business operations of Aldi.
- Identify the relationship of macro environmental factors with internal factors of Aldi.
Business environment refers to the combination of various elements that are present in internal as well as external environment of the company which influence how an organisation operates(Boons, and Lüdeke-Freund, 2013). ALDI is an international brand which is headquartered in Germany, have over 10,000 discount supermarket retail stores present in more than 20 countries worldwide. This report contains a description about types of organisations along with the legal structure, size and scope. It also explains the functional departments that are present in enterprise, their inter relationship with other units and organisational structure used by companies. In addition to this project also contains the uses of analytical tools such as PESTEL and SWOT which assists ALDI in identifying several factors that are present outside the organisation and what threat & opportunities they contain with them. These tools help ALDI in formulating strategies that contribute company's effort toward the achievement of organisational goal.
P1. Various types and purpose of organisation with legal structure
There are various type of companies that having different purpose and legal structure. These enterprise are as follows:
Private organisation: Business which is owned and managed by independent organisation or private individual and not being controlled by the government agencies. The main aim of private firm is to maximize their profit(Cavalcante, Kesting, and Ulhøi, 2011). ALDI is the supermarket chain established in UK is an example of private enterprise.
Purpose: The main purpose of ALDI is to provide quality products at lower prices. Company utilises a lean approach for its business activity to provide quality products to their customers at competitive prices. ALDI identifies the needs and wants of customer and do not compromise with quality of products.
Legal structure of private organisation:
- Partnership: It is the formal arrangement where two or more party combine together to control and manage a business. In partnership, partners contribute capital, resources, skills to operate business actions to achieve common objective. Partners have unlimited liability as they share profit and loss.
- Sole proprietorship: It is a type of business where an individual or person owns and manage the company and they are personally responsible for their debts. Sole proprietorship does not has separate legal entity from the owner. It is most simple type of business because there is ease of setup with nominal cost(Commander, and Svejnar, 2011).
- Limited company: It is type of corporation which limits the amount of liability that undertaken by the company's shareholder. The share capital is restricted by the memorandum of association and it is incorporated into legally distinct body.
Public organisation: It is type of business which is owned, controlled and operated by the government and it is exist to offer services for citizens. Public enterprise raise funds from variety of methods that are fees, taxes and financial transfers from other levels of government. Nation Health Service is the best suitable example of public organisation. This company offers various services related to health such as dental treatment, optical care, emergency services, primary care and many more.
Purpose: The main purpose of National Health Service is that good health care should be available for all. Company provides various services related to health such as optical care, dental treatment, primary and emergency care. It remains free to use for all United Kingdom residents.
Legal structure of public organisation:
- State government: This is a unit of government which makes and enforces law for a state. The responsibilities and power of state government are managed by the state constitution(Ebert, 2011). This is responsible for control trade within state and also establish different regulations for local corporation.
- Central government: This is a political authority that governs and manages the entire nation. Rules and regulations are developed for state as well as local government by the central government.
- Local government: This have only control over a specific area or region and don no enforce laws which affects the wider area. Local government manages the public administration of cities, towns, districts of a country.
Voluntary organisation: This is a indispensable and performs number of activities for the welfare for society, development of country and solidarity of nation. These organisation are independent, flexible, secular and work for welfare of the society, not operates for profit generation. Cancer Research UK is the suitable example of voluntary organisation which work for cancer patients(Elliot, 2011). It provides information and increase awareness about disease. Cancer Research UK conducts various research for prevention methods and treatment of disease.
Purpose : The main objective of Cancer Research UK is to reduce the number of deaths because of cancer and also increase awareness related to this disease.
Legal structure of voluntary organisation:
- Unincorporated associations: It is group of people who come together for common purpose and interest. This is not recognised as a law entity in the eyes of law. Liability of this governing body is unlimited. Unincorporated association work for benefit of the public.
- Incorporated organisation: This corporate body is recognised as legal entity in the eyes of law. It is considered to be as separate body from its trustees. Directors of the company are not personally liable for debts.
- Charitable company: These organisation are managed and controlled by charity commission, it limited by guarantee and not by share. This is limited company developed for attaining charitable objectives.
P2 Size and scope of organisation
There are number of organisation which operates in business environment and are different in terms of there size and scope. It is essential to understand their purpose and scope in order to achieve set objectives and goals. Every enterprise have different in size and scope which are as follows :
ALDI:- ALDI is a discount retail supermarket chains having around 10,000 store in more than 20 countries based in Germany(Hamilton, and Webster, 2015).
- Product and services:- It deals in product like food, beverages, sanitary articles, household goods.
- Mission and Vision:- Its mission is to provide greater satisfaction to their customers by offering them product at relatively low price. Their vision is to provide better standard of living by providing customers with high quality product at affordable price.
- Size and objectives:- ALDI operate its stores world wide and present in more than 20 countries such as Australia, France, Germany, Italy, Poland, UK, US etc. It has workforce of more than 20,000 people in United Kingdom (Hilton and Platt, 2013). There main objective is to maintain quality in their product and services by using leaner and smarter business processes.
National Health Service(NHS):- The National Health Services is a national healthcare system of United Kingdom which get fund through public that means it is funded through general taxation system.
- Product and services:- NHS provides number of health care services to England residents such as emergency services, urgent cares, dental services, general practitioners, primary care etc.
- Mission and Vision:- Their mission is to provide quality health care services to every person each day throughout the communities.
NHS vision is to deliver better care by providing quick access to modern services, better health by providing individual focused care to prevent them from illness and better value by ensuring that money will spend only when needed.
- Size and objectives:- NHS has more than 1.25 million employees and stand at fifth position all over the world in term of its workforce. The biggest part of NHS system is in England which caters 54.3 million peoples. Other systems are present in Scotland, Wales and Northern Ireland having its staff members 161,415; 84000 and 66,000 respectively. Its major objective is to improve health status of community by providing quality health care services to needy people.
Cancer Research UK:- It is a charity organisation for cancer research and awareness, situated in United Kingdom which get its entire fund through public investments. It provides information related to Cancer and conduct campaign to increase awareness about disease.
- Product and services:- It conduct research over the prevention methods, diagnosis and treatment of diseases and provide services in area such as providing successful cancer therapeutics, vaccines, diagnostics and required technologies and instruments for cancer treatment.
- Mission and Vision:- Their mission is to establish a effective infrastructure to maintain quality in transnational research for considering all aspects of cancer prevention, care & treatment and to establish a best possible mechanism so that every person and health professionals can contribute toward cancer treatment(Hollenbeck, Noe, and Gerhart, 2018). Its vision is to bring a day when all the cancers can be cured.
- Size and objectives:- Cancer Research have an thriving network of research which includes more than 90 institutions that are present in 40 cities and town throughout UK. Its main objective is to minimize the number of death that occurs due to cancer.
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P3.Relationship between various organisational functions and link with organisational objectives
For smooth running in an organisation, it is very important to having coordination in each department of firm. There are various wings in an enterprise which perform their function to serve their customers more effectively and perform their operations in efficient manner. There is interrelationship among different department of company so it is very necessary to having effective communication between manager of each sector.
Relationship between organisational functions are as follows:
- Marketing: This department plays important role that helps an organisation to differentiate their product from competitors. There are various functions which is performed by the marketing wing such as making marketing plan, product development and market research. Another important function of this is to promote the products of ALDI and position them in marketplace(Kian Chong, Shafaghi and Leing Tan, 2011). Marketing function is dependent on finance wing as they needed funds to perform their activities like positioning, promotion, after sales services and these funds are allotted by the finance department.
- Finance: Another department that is very important of an organisation. This function helps in developing future budgets and also allocation funds to others wing for various activities. Manager of this division must coordinate with other departments so they have proper information about the funds which is used by various department of an organisation in performing their activity. It helps ALDI in managing cash flow, capital investments and current assets.
- Human resource management: This department is very essential in an organisation as it function is to manage and it also provides direction to the employees of company. Human resource management deals with various functions related to the staff member of company such as recruiting, selecting, compensation, safety, performance, wellness, benefits, training and motivation. Therefore, it is very important to coordinate with other departments. So that they can identify the needs and recruit right person for the job.
- Operational function: It is the another type of function which is very plays very important in an organisation. Operation function helps in managing process of developing goods and services(Klem, 2013). It includes planning, organising, coordinating and controlling all the resources that are required to produce organisation goods and services. This division interlinked with marketing wing which helps in manufacturing products and services as per the demand of the customers. It helps ALDI in generating consumer demands and analysis the needs and wants of customers.
Various organisational structure are as follows:
- Matrix organisation structure: It is a types of company structure in which there are more than one line of reporting manager. This structure helps an enterprise in achieving quick market adaptation, higher efficiency, readiness and fast decision making. Matrix organisation structure is more suitable for business who operates in dynamic environment.
- Functional organisation structure: Another type of organisation structure in which company divided its functions in various department such as IT, marketing, human resources, finance, etc. In every department there are specialist which helps in improving the operational efficiency and also increase the productivity of firm(Savrul, Incekara and Sener 2014). ALDI uses functional organisation structure that helps company in gaining greater operational efficiency it is because employees are grouped together according to their skills and knowledge(Organizational Structure. 2018).
- Flat organisation structure: This type of organisation structure only has few levels of management among the executive levels and front line employees. There is fast decision making in flat organisation structures, it is because there has power given to their employees also. Communication between upper manager and baseline employees become easy and it helps in problem resolution. This type of organisational structure increase the employees satisfaction and motivation as employees has authority to implement their ideas and they also work as they want to attain the desired result.
P4 Positive and negative impact macro environmental factor over business operations
Macro environmental factors refers to various forces that are present in external environment of the organisation which may affect the operations and functioning of a company(Schneider and Spieth 2013). These forces have both negative and positive impact over the operations of an organisation so it is very essential for a company to formulate policies and strategies in order to minimize the negative impact of these forces that may hinder the growth of a company(PESTLE Analysis. 2018 ). Following are the external factors that must consider by ALDI while formulation policies :-
Political factors:- These factors are related to opportunities & pressure that are bought by government and the degree to which these changes impact the business operations. It generally includes government policies, trading policies, political issues etc.
Positive:- Majorities of ALDI stores are in Europe, Australia, U.S.A which are relatively free from war and conflicts and thus company remains unaffected from such issues which help in operating business activities successfully.
Negative:- Political instability have a negative impact over the business operations of ALDI, as new government may impose new taxation and trade policies which may increases the risk of high expenses for the company.
Economical factors:- These factors are related to the economical structure and policies of a country and its impact over business. Economical factor includes taxation, inflation rate, economy trend, foreign exchange rate etc.
Positive:- At the time of financial pressure consumer move toward purchasing of products which are available at low price. It is an advantage for ALDI as it provide quality products at affordable price.
Negative:- As economy of UK is recovering from its recession period, it may affects the market share of ALDI as consumers are moving from low cost stores to mainstream supermarket. So, company must formulate suitable pricing policies in order to deal with such situations.
Social factor:- These factors are related to attitude, beliefs and cultural value of the individuals that lives in that society in which business operates. Social traits affects the demand for the product and operations of the businesses(Smith, 2016).
Positive:- ALDI has moved from narrow range of product to variety of product which provides benefit to busy families as they get all stuff under one roof.
Negative:- Competitors of ALDI are offering 24 hour services for increasing their market share which is not currently used by this company. It has an adverse effect over the profitability of the ALDI.
Technological factors:- It includes factors such as emerging technologies, obsolete technology, research & innovation, intellectual property issue etc. These factors have an huge impact over the survival of the company.
Positive:- technological infrastructure is a very essential component of supply chain, that may help ALDI in enhancing the performance and attracting more customers.
Negative:- Increasing popularity of online and mobile shopping affecting the market share of ALDI as this option is not available with the company's customer.
Legal factors:- Legal factors are related to the several legislations, laws and regulations that may affect the functioning of the business. It includes regulatory bodies, employment law, healthy & safety law, tax regulations etc.
Positive:- There are number of laws and regulations which a company have to follow for performing its operation in a particular area. If a company perform its activities as per imposed laws than it will have an positive impact over the goodwill of the ALDI.
Negative:- ALDI is an international brand having its stores throughout the world as a result of which it has to follow different laws and regulations that varies across various geographical area. This has negative impact over the company because it increases the cost of operations(Weske, 2012).
Environmental factors:- These factors are related to the ecological and environmental aspects which may affect the demand for the company's product. It includes environmental regulations, reduction of carbon footprints, changes in weather condition etc.
Positive:- As peoples are becoming more aware about environment safety and like to prefer product which consumes less energy, don't harm environment and are easy to recycle. So, ALDI should offer environmental friendly products which help company in achieving competitive advantage over other and in increasing their market share(Wetherly 2014).
Negative:- Use of plastic bags and increasing wastage of food product causes a negative impact over the environment, this may create legal issues for company and also affects the image of the company.
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P5 Internal and external analysis of ALDI
Analysis of internal as well as external environment is very essential for ALDI as it help in formulating strategies for achieving the organisational goal and minimizing the issues that are present in firm's surrounding and can affect its growth. SWOT is an analytical tool which can be used in order to analysis the business environment ALDI(Veit and et. al., 2014). This analysis generally consider four elements such as Strength, Weakness, Opportunity and Threat, which have an huge impact over the growth and survival of the enterprise. It help company in identifying the threat & weaknesses that may affect its operations and in formulating plans for minimizing their effects and in accessing their strength and opportunities so that it can be used to enhance the operations of the company. Following is the SWOT analysis of ALDI:-
P6. Evaluate how strength and weakness interrelate with external macro factors
Strength and weakness of organisation are linked with external environment factors. It can be identified with the help of PESTLE analysis. It is very necessary for the manager of ALDI to evaluate strength and weakness of macro environment which helps in formulate strategies & policies and also take better decisions(Foss, and Saebi, 2017).
Interrelationship between strength and weakness are as follows:
Political factors: This element involves all political factors such as tax policies, trade restriction, employment law, environment regulations, tariffs, political stability, trade reforms which affects the actions of an organisation. When there is changes in these components than it affects the strength and weakness of ALDI.
Strength: As the stores of ALDI are majorly located in Europe as well as in Australia, China, USA and are free from conflicts, disputes. Confit free retail supermarkets of ALDI is the strength of company and this leads to increase in effectiveness and efficiency of an organisation.
Weakness: Due to huge competition, ALDI reduces the cost of their products and services which negatively affects the image of company in the eyes of manufacturers and suppliers. It is because when company decreases the price of products than they paying less to their suppliers(Findlay-Thompson and Mombourquette, 2014).
Economic factors: This component is related to interest rate, economic growth, interstate taxes, inflation rate, recession, minimum wage rate, unemployment, credit availability and many more.
Strength: As Britain is voted to leave EU, this has works in ALDI's favour. It is because prices of products increases and cost of imported items being pushed up . ALDI provides discounts and various offers to their customers and this results in increase the growing rate of ALDI.
Weakness: Economic slowdown in developed countries and Euro zone cries may impact the business greatly because customers who has less income than they have forcefully buy cheaper and retailer owned goods.
Social factors: Elements related to cultural expectations, population dynamics, healthy consciousness, global warning, norms, etc. that affects the community socially and market. If there is changes in taste and preference among customer and it has great impact on ALDI.
Strength: ALDI is highest supermarket in United Kingdom as they provide on time payments to their employees and also give higher wages to them. It is the strength of ALDI because when employees are highly paid than they are more satisfied and there is very less employees turnover.
Weakness: Consumers taste and preference are changing more frequently so it the weakness of Aldi because it is very difficult to cope up with consumers changing demand.
Technological factors: Components that includes the rate of technological innovation and development which may affects the business and market. When there is use of advance technology than it influence the actions of ALDI and also have impact on strength and weakness of an enterprise.
Strength: There is advantage of Aldi is company also uses online platform to sell their products and services. By this firm is connected with there customers and also aware them about introducing new commodity(Dima, Grabara, and Modrak, 2014). This results in increase in profitability and productivity.
Weakness: Increasing number of customer in supermarket, there is weakness of ALDI is they are not adopt self service checkout from grocery and this results in consumers only buy few products due to the long line in the supermarket.
Environment factors: It takes into consideration environmental and ecological aspects that could be either social and economic in nature. This includes natural calamities, temperature, monsoons, etc.
Strength: Major strength of Aldi related to environment factor is that all its of its stock purchased from local farmers which help company in providing organic products to their customers and in avoiding legal issues.
Weakness: Company uses plastic packaging material which can not be disposed easily and greatly affects the environment.
Legal factors: Elements related to legal aspects such as quotas, taxation, resources, exports, imports that affects the business operations. If there is some changes in legal factors than it greatly impacts the strength and weakness of ALDI.
Strength: Major strength of Aldi is that it follows all the laws and regulations which results in increase in brand image and goodwill of the firm.
Weakness: As ALDI is multinational company and located worldwide. So it is very difficult for firm to follow all laws and regulations. Every country has different import and export policies so company faces the problem of understanding the policies of various countries.
From the above report it has been summarized that analysis of business environment is very essential for the proper functioning and growth of the company. This analysis can be performed using SWOT, a tool which help in identifying strength, weakness, threat and opportunity that an organisation have. Another analysis tools that can be used by ALDI is PESTEL analysis that will provide information about the positive and negative impact of macro environmental factors over the operations of the enterprise. By using these tools company can formulate strategies and policies which assist ALDI in minimizing the threats and maximizing the profitability of the firm.