Business environment refers to the internal factors of organisation and external factors that affect the operations of an organisation. The internal factors which influence a business organisation are employees, shareholders, suppliers, customers while government policies, economic conditions, technology, rival business entities constitute external factors (AnÄ±l and Ficici, 2017). The present report is based upon General Motors operating in Detroit, Michigan, America which manufacture, designs and sells vehicles and their parts. Along with that, the macro factors and their strengths and weaknesses in context of business is covered.
P1 Different types and purposes of organisations
The various types of organisations that conduct operations in a country are public, private and voluntary organisations. The purpose and legal structure of these organisations are explained below:-
Public Organisations- Those organisations that are wholly or partially owned, managed and controlled by government and other related agencies are known as public organisations. These enterprises work to deliver goods and services for the benefit of public (Burayidi, 2013). This sector provides wide range of services like infrastructure, transportation, health, education services etc. Crown Prosecution Service is a public prosecuting agency in England and Wales that conducts criminal prosecutions.
Legal Structure: Public enterprises are partially or totally controlled by government. Government are of 3 types namely local, state and central government. On the basis of type of government running and managing the enterprise, public organisations are broadly classified into 3 types-
- Central organisation: This is an organisation which is managed and controlled by Central Government.
- State organisation: This type of organisation is owned, run and controlled by the State authorities.
- Local organisation: In this organisation, the administration and controlling authority is Local Government.
Purpose: Crown Prosecution Services (CPS) is a public prosecuting agency which prosecutes criminals in England and Wales. The major responsibilities of CPS are providing legal services and advices to investigative agencies including police during criminal investigations.
Private Organisations- These are those organisations that are run, managed and controlled by individuals, firms, companies and institutions (Charfeddine, 2016). Private organisations are mainly incorporated for profit making by selection of appropriate organisational structure and creation of loyal customer base. General Motors is a company located in Detroit, Michigan, America involved in manufacturing, designing and distribution of vehicles and its parts.
Legal Structure: The legal structure of private organisation is as follow:
- Sole proprietor- It is an entity fully owned and managed by one person known as sole proprietor.
- Partnership- It is a formal agreement between two or more parties to conducts operations of business together. Partnership comes in two ways: General partnership and limited partnership.
- Company: A form of organisation made up of various individuals which do not offer its shares to public and runs for the profit motive is called company.
Purpose: General Motors is a company that deals in manufacturing and distribution of automobiles and its parts. The fundamental purpose of GM is to encourage workforce in delivering their best for achievement of organisational goal and provide products and services of superior quality to customers.
Voluntary Organisations- It is a group of individuals who voluntarily enter into an agreement to form an organisation to achieve the desired common goal. Such organisation include not for profit, non government organisations and trade unions (Hacioglu, Dincer and Celik, 2012). UNICEF is a voluntary organisation that renders social and development assistance to children and mother in developing countries.
Legal Structure: Legal structure of voluntary organisations is:-
- Unincorporated Association: This structure is ideal for small groups with short term goals, less funds and which do not intend to acquire property or employ staff.
- Trust: Trust is an arrangement where trustee holds the right to property for the benefit of beneficiary.
- Limited Organisation: This structure of voluntary organisation is where the number of members or their share in organisation is limited.
Purpose: The main purpose of these enterprises is the accomplishment of the common goal laid behind their formation. UNICEF is a United Nation agency that provides social and developmental help to children and mother in developing countries.
P2 Size and scope of different type of organisations
Public, private and voluntary are the three types of organisation whose size and scope may vary in accordance with their scale of operations. The discussion about various forms of organisation is given below:-
Public Organisations- Those enterprises which conduct operations within partial or full control of government are public organisations (Hussin and et. al., 2017). Crown Prosecution Services is a non-ministerial department. It prosecutes criminal cases in England and Wales where investigation is conducted by police or any investigation authority. Its size and scope is defined below:-
- Size: CPS operates across England and Wales with 14 regional teams involved in criminal prosecution. Each of these 14 teams is headed by Chief Crown Prosecutor. It has around 6000 staff members.
- Scope: CPS has a scope of making use of digital technology in their operations for faster flow of data within and outside the organisation.
Private Organisations- Those enterprises which work independent of government intervention in ownership and control of their operations are private organisations. General Motors headquarter in Detroit, Michigan designs, builds and sells cars, trucks and automobiles parts worldwide.
- Size: Company employs 207,000 people across six continents out of which 140,000 are hourly employees and 67,000 are salaried. GM provides 158 facilities worldwide. Company produces vehicles and its parts to satisfy customers in over 120 countries around the globe. It is number one company in terms of vehicles sold in two of its most potential markets, US And China.
- Scope: Company hires potential and skilled employees. Its employees speak more than 50 languages and live in 23 different time zones. Thus, the enterprise has a scope of expansion across various other countries of globe where company has yet not delivered services (Otoo and Drechsel, 2018).
Voluntary Organisations- These are those enterprises which are voluntarily formed by a group of individuals for accomplishment of common goal. United Nations International Children's Emergency Fund (UNICEF) was created with an aim to provide emergency food and healthcare to children in countries devastated by world war.
- Size: UNICEF operates in 190 countries and territories to save children’s lives, to defend their rights and to help them develop from the stage of early childhood to adolescence.
- Scope: UNICEF can consider expanding its business in locations where they have not explored and given contribution for upliftment of children.
P3 Relationship between different organisational functions and how they link to organisational objectives and structure
Every organisation tends to create a working structure where the authority and responsibilities of every individual and function in a business entity is clearly defined. In context of General Motors, enterprise follows a corporate culture where the organisation is sub divided into units and functions like Finance, Marketing, HR, Research and Development etc. The interrelationship between these functions is explained below:-
Human Resource and Finance Department: HR department of General Motors is responsible for hiring potentially skilled and technically knowledgeable personnel to ensure no default in the services delivered by company across the globe (Toedt, 2014). For this, it needs funds which will be sourced by the Finance Department. Employing technically viable workforce will ensure delivery of quality goods and services at global level and thus more revenue generation for company.
Research & Development and Production Department: Research & Development department of General Motors develops an understanding of the latest desires, needs and preferences of customers. Also this function gains an insight into the improvements needed in the products and services rendered by company in past. R&D function provides this information to production department so that they can develop products as per the requirements of consumers and carry out developments and improvements in them if required. This helps the company in remaining aligned with the needs of public and thus aims at improving the brand position in market and generation of high revenues. Get the best online oxford assignment help at an affordable budget.
P4 Positive and negative impacts the macro environment has upon business operations
The management of General Motors has to consider both micro and macro factors during the course of its operations. These factors can have positive as well as adverse effects. The macro environment factors that affect GM can be explained by using PESTLE Analysis as well as Porter Five Forces. PESTLE analysis is explained below:
Political Factors: These factors indicate the extent of government intervention in operations of a business. Such factors are policies, rules and regulations, laws & legislations made by government.
- Positive: Political stability in USA imply growth opportunities for the enterprise. Also, company abides by laws relating to custom duties, embargo, quotas and trade regulations.
- Negative: General Motors faces the threat of governmental promotion of public transport and other alternatives in US. Company can overcome this by keeping an action plan for such situations (Vasilcovschi and Georgescu, 2012).
Economic Factors: Those factors that affect the economic conditions of a country comprise environmental factors like inflation rates, interest rates, foreign exchange rates etc.
- Positive: Favourable economic conditions of country ensures high disposable income for people and thus increased demand and revenue for company.
- Negative: GM gets affected by fuel price fluctuations and relative demand of customers. Fluctuations in prices of steel have also impacted manufacturing process. Company can overcome this by maintaining adequate reserves of fuel and steel for future needs.
Social Factors: Social factors include demographics such as population, occupation, age etc.
- Positive: GM understand the need of customers and provide high end vehicles according to their preferences keeping in mind their social status.
- Negative: A change in customer preferences can cause a shift in demand for products of the company.
Technological Factors: Over time, there have been significant changes in technology like automation of automobile industry, digitisation process etc. These constitute technological factors.
- Positive: Automation of machines and use of robots will assist General Motors in providing advanced vehicles, using latest designs in manufacture of automobiles and its parts.
- Negative: High use of technology can cause difficulty for employees to understand the processes and hamper their productivity. Company can tackle this by providing training to the workforce.
Environmental Factors: According to the current environmental condition, companies are very considerate about factors like Co2 emission, petrol and gasoline etc., because these are limited resources and it is imperative to efficiently utilise them.
- Positive: Since 1994, GM has been conducting operations in a way that reduces emissions of factory. Company has taken environmental pledge of CERES principles which comprises of 10 codes of conduct for entity (Warkentin, Sugumaran and Sainsbury, 2012).
- Negative: Adverse climatic conditions may result in late delivery of automobiles and its parts. Company can handle this by developing such channels of distribution which are not affected by climate.
Legal Factors: Legal factors include the laws and legislations made in relation to health and safety laws of country.
- Positive: GM abides by custom, safety and employment laws along with 'Automobile Recycling Law'.
- Negative: Violation of laws set in market results in penalty as well as bad image for company.
Porter Five Forces
Threat of new entrants: (Weak)
It is difficult for new companies to enter automotive industry due to the large fund needed as investment. Also, large amount is needed to be spent for hiring skilled workforce and training them which gives an edge to General Motors to enjoy the brand position in market.
Bargaining power of suppliers: (Weak)
The bargaining power of suppliers in this industry is quiet weak as there is high probability of substitution of products if customers think that they get the same features in a less price thus posing threat to General Motors.
Bargaining power of buyers: (Moderately strong)
The customers of automotive market are generally price sensitive and are not at all hesitant in switching to alternate brands if the deal they offer seems alluring, this poses threat for General Motors. Yet company tries to maintain customer loyalty by maintaining the quality of vehicles and offering latest and innovative features in cars manufactured by them.
Threat of substitutes: (Weak)
As companies like General Motors have already established their customer base to whom their vehicles are easily acceptable and gains high satisfaction, thus, threat of use of alternate modes of transport is very low.
Competitive Rivalry in the industry: (Very strong)
As there are a large number of automobile companies in the world, thus the competition in this industry is very high which is a matter of concern for companies like General Motors who are expected to come with latest features and innovation in every new model.
P5 Internal and external analysis of specific organisation in order to identify strengths and weaknesses
SWOT analysis is a powerful tool for analysing macro versus micro environment which supports to strategic planning within an organization (SWOT analysis. 2018.). It stands for internal factors such as organizational strength and weakness as well as external factors which covers by opportunities and threats. In respect of General Motors, explaining SWOT analysis below:
P6 Strengths and weaknesses interrelate with external macro factors
Macro factors are the external factors which affect operations of an entity such as political, economical, social and technological. In context with the General Motors, company needs to analyse and interrelate the strength and weakness of such macro factor such as:
PoliticalStrength- The main strength of the political factors such as strong relation with the inter-governmental bodies, easy availability of the resources etc. This will create positive roles of the company in the country where they are operating their business (Charfeddine, 2016).
Weakness- This factor would affect the decision making and independent functioning, policies and process of the general motors. Company needs to implement the structure to take their own decision making.
Strength- This factor plays an effective role in deciding the price of the commodity, interest rates and growth rate of the company. In this, General Motors have strongest position in the context of taking the economical decision making.
Weakness- High inflation rate can affect the working process and management of an organisation. If rate of inflation is high, there could be chances of loss of job of employee in the General Motors.
Strength- Social factor such as people’s influence, different taste and preferences can affect the decision making of General Motors. Social factor would help in the welfare and development of the people as well as society which when considered by General can increase their revenues as well as profitability.
Weakness- In context with the General Motors, social factors can lower down the morale, values and vision of the company. Different choices and preference can affect the production process of the company and thus affect the overall sales and profits. (Burayidi, 2013).
Strength- In context of General motors, adaptation in the technology can influence the buyers behaviour to buy products or services. Updated technology can engage the customer's mind, interest and thought into the purchase decision.
Weakness- Updated technology can raise the prices of the product or services. As a result, it can affect the purchase behaviour of an individual as it may affect their budget or cost of purchasing the products of General Motors. This will affect the demand of vehicles manufactured by company thus impacting the overall profitability of company.
From the above report, it has been analysed that organisations are categorised into three categories namely public, private and voluntary. It is on the discretion of company to select the form of organisation in which they want to conduct operations. It is also observed that various organisation differ from each other in terms of their size and scope. It has also been concluded that every business organisation operating at global level need to consider the micro and macro factors for effective conduct of business operations. Enterprise can use SWOT analysis for internal analysis and PESTLE for external environment.