A business performs in an open system that gets all needed resources from the environment and offers its services and goods to the environment. There are distinct forces of the environment, some are internal and close to the business, while others are external factors. These external factors may be in relation to regional, national or global level. They provide threats or opportunities to the business world. Every businesses tries to grasp the current opportunities and put necessary attempts to combat threats that arise from the business environment. Here, the report is briefing about internal and external factors affecting the business operations of Sainsbury. The reader will also able to comprehend how the internal strengths and weaknesses of the company links to the external factors. At last, the reflective statement is elaborating the way in which business environment Pearson decisions are influenced by the internal and external forces.
A. Short Essay
1.1 The relationship between different organisational functions and how they link to organisational objectives and structure
An organisation is a social entity that has a collective goal and is linked to an external environment. The role of retailers like Walmart is to respond dynamic change related to its stakeholders for example, varying customers’ expectations and the demands from the suppliers and local communities. To meet the challenges and fulfil the expectations from different groups of stakeholders, Walmart commits to be helpful in meeting the responsibilities of the organisation and core values. Moreover, skilled Human Resources is needed to fulfil these commitments of the company. It also has responsibility toward the environment, which is maintained through the lower emission of carbon along with offering the quality foods and grocery items toward the society (Robbins, 1990).
Therefore, the structure of an organizational consists of activities such as allocation of tasks, coordination and supervision of human resources and various activities, which are directed towards the achievement of organizational objectives. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. An organization can be structured in many different ways, according to its objectives. The structure of an organization determines the mode of operation (Bedeian and Zammuto, 1991). The structure defines the assignment of the roles, power and responsibilities, its control and coordination and the flow of information flows between the different levels of management. A structure depends on the organization's objectives and strategy. In a centralized structure, the top layer of management has most of the decision making power and has tight control over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions may have different degrees of independence (Gerloff, 1985).
Walmart adopts a functional organizational structure where different functions go into separate departments that report to departmental heads. These managers report to higher level of management hierarchy. The adoption of functional structure provides several advantage to the Walmart such as having clear lines of authority, and allows each employee to concentrate on a particular task. However, there are certain drawbacks such as it may happen that departments fail to talk routinely to each other or at cooperate well. A customer may get bounced from department to department if his problem doesn't relate to one particular function. The grouping of various departments is done on the basis of functions such as production, finance, marketing, sales, purchase and human resource. These various departments or functions can be further sub-divided for example, marketing function of Walmart can be divided in to advertisement, sales and after sales service functional departments (Robbins and Coulter, 2002). So the functions can be classified into two parts:
Basic functions such as Production, Marketing, Finance and Personnel.
Secondary Functions as further sub-parts of basic functions according to the organizational requirement for example the Production function may have sub-departments such as Product planning, R&D, Quality control and material handling (Khandwalla, 1973).
The interrelationship between these functions is an important aspect as it helps to provide advantage of integrating the specialization of individual functions for the overall achievement of the organisational aims and objectives. Also, easy control over functions and pinpointing training needs of manager can be ascertained. The lack of interrelationship between these functions may lead to increase conflicts and coordination problems among departments (Mullins, 2007).
The most important feature of functional organization is that the entire organizational activities are divided into specific functions such as operations, finance, marketing and personal relations in such a way that identical functions of various departments in the organization are performed by specialists. Each functional area is put under the charge of functional specialists and he has got the authority to give all decisions regarding the function whenever the function is performed throughout the enterprise. Moreover, specialists often operate with considerable independence which increases the efficiency of employees. Specialisation also helps to better divide the labour according to the related function (Zeki, et.al., 1981). Management control is simplified as the mental functions are separated from manual functions. Checks and balances keep the authority within certain limits. Specialists may be asked to judge the performance of various sections. In this way, greater efficiency is achieved because of every function performing a limited number of functions. Specialization compiled with standardization facilitates maximum production and economical costs. Expert knowledge of functional manager facilitates better control and supervision (Jones, 2010).
However, the lack of interrelationship is disadvantageous for the organisation like Walmart. Although, the functional system is enough complicated to be carried out at low levels. Lack of co-ordination weakens the disciplinary control as worker is not commanded by one person so there will be no unity of command which creates confusions. Multiple authority also pose difficulties in fixing responsibility. Because, there may be increasing conflicts among the supervisory staff of equal ranks (Galbraith, 2008).
A. Internal and external analysis
2.1 Positive and negative impacts of the macro environment on the business operations
By using the following PESTLE analysis, the managers and leaders at Walmart can identify negative and positive impacts of the business environment and factors that needed to be prioritised in developing the business strategies (Gillespie, 2007):
Political factors – Walmart takes into consideration the retail market political aspects, generally related to government policies. The below are potential impact of political environment on the Walmart:
- Politics high stability (Opportunity)
- Politics support to global activities (Opportunity)
- Pressure for hike in wages (threat)
The macro environmental aspects show that the company should adequately address the high wages threat. The particular factor is a threat, as it goes in against of cost minimisation concept of the company (Frank, 2006).
Economic factors – The organisation is under important pressure of changes in the economy. The economic changes directly results in the business revenue fluctuations. The following are some economic factors impact on the Walmart:
- Major economies stability (opportunity)
- Developing nations regular growth (opportunity)
- Decreasing level of unemployment at the global level (opportunity)
All the above factors reflect that the Walmart should exploit the economic opportunities around the globe. The emphasis must be given on the emerging nations that have increased level of demand for the retail products and services (Chang, 2005).
Socio/cultural factors – These factors mainly affect the preferences and perception of the company’s potential customers. It includes the following:
- Trend of healthy lifestyle (opportunity)
- Urban migration (opportunity)
- Cultural diversity trend (opportunity)
Hence, it can be said that the socio/cultural factors present several opportunities for the company. Walmart can enhance its portfolio in more healthy and nutritional products. Also, the organisation can improve its products range to satisfy the several cultural preferences. Furthermore, the firm can adjust its tactics to exploit the rising demands of customers around the globe (Clayton, and Hilz, 2015).
Technological factors – The new trends of technology should be adequately considered by the Walmart. The company’s competitive landscape is affected by the technology. The following are technical factors potential impact on the business:
- Increasing automation of business (opportunity)
- Available of wide information and business analytics (opportunity)
- Increasing use of mobile device among the customers (opportunity)
The organisation can raise its overall investment in all above factors. Moreover, the Walmart can grasp the opportunity of offering online services by developing mobile apps. The online selling and marketing activities will definitely enhance the revenue of business (Yao, 2005).
Environmental/ecological factors – These factors are important to be considered by the Walmart and includes the following:
- Trend of business sustainability (opportunity)
- Environmentally friendly development of product (opportunity)
In order to achieve the sustainability of business, Walmart should enhance the operational effectiveness. The technological innovation will support in increasing business efficiency. The improved standards and policies on products offered at the stores can also strengthen the organisation capacities in addressed the ecological factors (Min and Galle, 2001).
Legal factors – These are in relation to the requirements of regulations and laws. The following legal aspects creates threat and opportunity for the business:
- Employment regulations (opportunity)
- Food safety regulations (opportunity)
- Reform of tax law (threat)
The tax reforms are the possible threat that results in high rates of tax. Walmart should focus food safety regulations and other policies of government in relation to food supply, with an aim to maintain its quality standards. The organisation can also exploit the opportunity of effective human resource management practices to comply with employment legislations and gain better image in the market (Larkins, 2015).
2.2 Internal and external analysis to identify strengths and weakness
Walmart is one of the leading retailers with more than 10,000 stores generating $400 billion revenues. The company is able to exercise the power of its customers on the suppliers to lessen the prices. The retailer has value for the convenience, money and wide products range all in one outlet. The organisation has grown sustainability in past some years as well as has experienced the internal expansion. It also has key competency in using information technology that perfectly supports its global logistic system. For instance, it can analyse how the particular product is performing store-by-store and country-wide. It support in the effective procurement for the company (Mata, Fuerst and Barney, 1995).
Walmart has also put a focused strategy for the adequate management and development of human resource. People are main player in the operational and business success of the organisation and it invests money and time in training and retaining competent staffs. Being the largest retailer in the world, the company has major advantage of economies of scale as it can share the fixed costs over several locations and many product lines so that it becomes the cheapest destination to shop. Moreover, due to its size, Wal-Mart can exercise the negotiation power over suppliers by asking for lower prices from them. The company can also affect the competition by selling some of the selected items at no-profit, thus driving competitors out of the market (Davies and Ormosi, 2013).
The organisation in its intentions of saving costs has been disrespectful with staff members and thus, involved the labour related cases or lawsuits. The firm is also criticised for its unpaid overtime work, poor conditions, female discrimination and low wages. Walmart does not adopt the differentiation strategy, which is followed by its rivals, due to which it loose the potential customers. Moreover, the employee’s high turnover is one more weak point in the retail sector (Rosen, 2005). The organisation loses quality staffs, as they find better labour conditions and high skilled jobs at rivalries. Also, the negative publicity tarnishes the organisation reputation of Walmart that is criticised for the poor working conditions and the practice of bribery (Ravi, 2015). Since, Walmart sell products across several industries like clothing, food, home furnishing etc. it may not be having the flexibility and specialisation as some of the more focused competitors.
The Company can merge with, takeover and develop strategic alliances with other international retailers concentrating on particular markets, like the Greater China Region and Europe. Currently, the outlets only perform its business in a relatively in few nations. Thus, there are many further business opportunities in the consumer markets of India and China. New store and locations offer the company an opportunity to exploit market development. The retailer has an opportunity to expand its line of products. It is because there is a rising awareness among people related to health issues. The customers are also willing to buy healthy food in outlets, so that the company can enhance the range of health and nutritional grocery, in order to earn more (Rajput, Kesharwani and Khanna, 2012).
Being an international retailer, the Walmart is exposed to several political issues in the nations where it operates. The company is facing intense price competition on the global level. The retailer has room to improvement but due to its business identity and size of low cost retailer, it is hard for the company to think how far it can go. Some of the rivals like Tesco, Amazon and Costco are putting great efforts on eliminating the differences in prices, which is enjoyed by the company. Moreover, there are some fierce resistance faced by the company at local level. Further, combating with the pressure of labour union is pressuring the organisation to raise its benefits and wages (Cummings, 2007).
B. Reflective statement
2.3 How these strengths and weaknesses are linked to the external macro factors
The major strength of Walmart is its large number of stores located at widespread locations and covering a huge geographical area. The company operates in 28 countries around the world. The success of carrying out operations in such a large number of countries depends upon the economic stability of these countries, which relates the company’s strength to its economic environment. Even the changing culture around the world has helped Walmart to expand its business in new territories. For instance, the modernization of Asian countries and the adoption of European culture and lifestyle by these countries have allowed Walmart to successfully capture the market share in these countries (Basker, 2005). Lifestyle of the customers is a part of social cultural environment of the business. Another strength of the company is the company’s efficient global distribution system. The remarkable efficiency of the global distribution system depends upon the use of information technology by the company. The company always adopts the newer innovations in the Information Technology sector. Keeping itself updated with the technological advancement has allowed the company to build an efficient global distribution system which has become company’s vital strength and the key to success (Artz and Stone, 2006).
One of the major weaknesses of Walmart is the high employee turnover rate. The company has been disrespectful with its staff which has resulted in legal actions taken by the employees against the company. These cases filed against the company are related to the legal environment in which the company operates. Another weakness of the company is its inability to discriminate amongst its customers, which is very effectively done by its rival. Different categories of customers are a part of the socio-cultural environment of the business. The company should discriminate amongst its customers and must make specific strategy for different categories of customer in order to gain competitive advantage over its arrival in the industry (Parnell and Lester, 2008).
2.4 Impact of micro and macro factors on how decisions are being made so that business objectives are ultimately met
After analysing the Macro environment of Walmart it was found that there are many opportunities that exist for the business. PESTEL analysis was adopted to assess the external environment of Walmart and it was found that most of the environmental factors which are related to the business and impacts it are providing various opportunities for the business. SWOT analysis was also performed in order to assess the internal environment of Walmart and certain strengths and weaknesses of the company were ascertained in the process. It was discovered that the company can effectively use its strength to avail the opportunities that exist in the macro environment (Hicks, 2009).
Moreover, the elements of internal and external environment are having a far reaching impact on the decision making of the business. It is according to these factors that the decisions are made in order to achieve the ultimate objective of the organization. For instance, in the political environment, the stability of political relationship between nations and the political stability within a particular nation provides an opportunity to a multinational company like Walmart, to expand its business, by making it easier for the company to enter new markets in different countries. In the same way the economic prosperity of the developing nations around the world also provides the opportunity to the company to take on its business to the territories of these developing countries. The macroeconomic environment thus provides the opportunity to the company to expand its business. This opportunity was very well availed by Walmart and has extended its business in 28 countries around the world (Chen, 2007).
On analysing the social environment of Walmart it was found that the change in trends and cultural diversity has resulted in the increase in use of super markets by people around the world, especially in the emerging economies. This is an encouraging sign for Walmart as this change in trend can result in increased number of customers. On further analysing the social factor of the macro environment it was also found that there has been a trend of urban migration in the developing economies where the people tends to migrate towards urban regions. Urban migration increases the population of the area where Walmart’s stores are generally located, which increases the number of potential customers for the company. This has helped Walmart to decide their areas and locations at which it has to open its store so that it can attract maximum number of customers and can capture reasonable market share (Jones and Hill, 2010).
On analysing the technological factor of the Macro environment in which the business operates it was discovered that the technological advancement provides vast opportunities for the business to grow. Moreover, while assessing the strengths of the company, the extensive use of technology by Walmart in its operations was discovered. The extensive use of advanced technology in its operations has gradually become the strength of the company and has also made the company efficient and cost effective (Broadbridge, 2008).
The increasing use of mobile phones by customers these days has also worked in the favour of the company as the company can extend its marketing through mobile phones; and by doing so it will reach a large number of potential customers. The company has started to send promotional messages to its regular customers so that they are made aware of the promotional schemes at their nearby stores. The company was found indulged in some disrespectful activities with its staff members in the recent times, in order to save cost (Evans, D., 2010). On analysing the legal factor it was found that there are many employees regulation which exists in the law. Employees have taken full advantage of their rights provided by the employees regulations and have sued the company for its unlawful acts. The Walmart has to understand the regulations and must act according to the laws of the land and may have to compensate the employees for its misconducts (Yu and Shao, 2007).
In the first part of the project, the different types of organisation according to the purpose, size, scope and nature have been explained. Furthermore, the concepts of organisational structure and relations have been discussed. To understand these concepts better, Walmart and its subsidiary in the UK – ASDA has been chosen in order to understand the structure and relations prevailing in the company. It has been found that the organisation follows a structure similar to that prescribed in the modern theory of organisations. Moreover it possesses flexibility and a wide span of control. In this way, the understanding of the impact of structure and relations on the success of an organisation has been attained. The second part of the project provided in-depth investigation of positive and negative impacts of the macro environment on the business operations. The reflective statement demonstrated the effect of factors of micro and macro environment upon the decision making of the business towards achievement of its ultimate objective.
- Bedeian, A.G. and Zammuto, R.F., 1991. Organizations: Theory and design. Dryden Press.
- Chang, Y. R., 2005. What Market Forces Impact Organizational Performance.
- Clayton, E. and Hilz, A., 2015. Efficiency & Attitudes.
- Davies, S. and Ormosi, L. P., 2013. The Impact of Competition Policy: What are the Known Unknowns.