Business and the Business Environment
This study discussed about the organizational structures and different types of organization. A reader will gain the in depth information about types of organizations and what are the external factors influencing over the business position. The strengths and weaknesses of the each type of business and overall its characteristics will also be discussed. There will be macro environment and its model discussed for analysing the business environment and how influences the company.
a) Organizational Functions Connected to the Organizational Objectives and Structures
Unilever is a multinational organization which performs various basic and extra ordinary functions of business in order to achieve its business objectives and also compatible with the business structure. It is performing several functions including marketing, human resource, sales, purchase, inventory management, finance and many more (Adams, 2014). These functions allows the Unilever to be achieving its business objectives such as achieve the business growth on annual basis by certain rate of percentage. Its aggressive marketing function is enabling the Unilever’s management to be achieving the growth function because they are engaged in business promotion on social and electronic media to attract the large number of customers and buyers. As long as potential buyer is not introduced with the certain brand and not keep remembered about such brand exists in the world. Every time when Unilever starts aggressive marketing on both electronic and social media, they have the sales growth multiple times comparing to the rest of days when no advertisement is on media (Bagley, 2013).
Organizational structures are also consistent with the functions performed in the Unilever. Marketing function is allocated on the divisional level for promoting the each product of Unilever. Similarly, other functions are also performed in the same business structure and each function is used in the division which ultimately promotes the business brand in all product categories (Baldwin, 2015). Unilever is a big organization which complicated financial management and this functions needs the expert employees who having relevant experience of decades in the same field. Mismanagement of finance can lead the Unilever into business disaster and they will not be able to achieving the business objectives fully.
Therefore, each division manages its finance separately and also takes the commands from Headquarters which ultimately controls the whole business finances and also fulfills the need of each division if they are unable to generate the enough cash to fulfill its own financial needs on their own (Emerson, 2012). Therefore, its business function shows that they have been consistent with the business objectives and organizational structure is also very suitable which lets the functions to be performed at its peak.
Unilever is having a hierarchy organizational structure and there are different divisions established in which employees are working for promoting the single brand of Unilever. Each division is also having all same business functions which need to be performed in every division. They have human resource department for the each division which takes care of the employees and announce the rewards for the good performance (Whitaker, 2016). When they are showing the good performance of employees, they are reward to get motivated and ensure they remain the part of the organization in the future too. Therefore, Unilever is an organization which performs all basic functions of business necessary to continue with the operations and competing in the international market. Each business function has a dedicated role of reaching the division and its sales at the top level and each division further strengthens the Unilever as an organization (Donald, 2010).
b) Organizational Functions Connected to the Organizational Objectives and Structures
There has been internal and external analysis of Unilever conducted in the following to evaluate its strengths and weaknesses.
They have strong portfolio of brands which have established its brand identity comparing to the similar products of competitors. This strong brand development of all of its product portfolios is contributing into significant sales growth on annual basis. Its divisional management do not see any financial instability and decline in profits which further helps them re-investment of funds without raising the bank loan and bearing the interest expenses (Emerson, 2012). It’s almost all divisions and products are profitable and contributing into the combined financial statement and else Headquarter finances the weak product from the other profitable division to make it stronger once again.
Unilever also has the diversified portfolio which enables the company to be generating the higher sales volume throughout the year and four seasons. Most of its food and personal care items which are not limited to seasonal sales though but its diversified product portfolio creates the regular cash inflows and they mostly do not see any financial instability and funds challenges which make it mandatory for them raising the loans from banks. Large sized organizations are those which profits reaches billions of dollars on annual basis and employ the employees in thousands. Its objectives are to ensure the strong presence in International market and get the maximum brand recognition. Unilever organization enjoys the international presence on only the regional level and its profits reaches at millions of dollars on annual basis (Janthan, 2011).
In the contrary, small sized organizations are those which remain limited to the national level and they have limited profits, sales and annual growth.
As far as its weaknesses is concerned, there are variety of substitute products available in the world currently selling by Unilever. There is stiff competition available because Unilever is selling those products which have substitute available and the cheaper one. This is a reason only mediocre and upper class can afford the Unilever products which mean they are targeting the only limited group of people and not able to maximize the business profits. In the functional structure, each type of employees are made of separate group in accordance with the nature of job they will be performed (Michael, 2012).
For Instance, Marketing officers all will be sitting in the marketing department together so working together and put the efforts combined. A divisional structure which divisions established is on the basis of product portfolio. For Instance, a food manufacturing Unilever engaged in producing the various food items including noodles. A separate division will be established for the Noodles product so that division will be responsible for the whole operations of Noodles from marketing to human resource management (Baldwin, 2015).
Impact of Organizational Structure on Function of the Business
Business functions definitely affect the strengths and weaknesses of the Unilever business organization. There will be different external factors discussed to determine that how they are affecting the internal strengths and weaknesses of the business discussed in the below.
Budgeting Function has the role of keeping the input cost totally under control to avoid the higher cost of production. There is a type of inflation which can directly impact on the business cost push inflation. This inflation occurs when cost of raw material increases and so the cost of goods production. Unilever has the most efficient operational efficiency but increasing the cost of production will also let them increasing the prices which reduce its aggregate demand. Unilever products are being sold in 190 countries and they are operating in around 50 countries (Lee, 2012). A political instability can lead the government to announce unexpected business policies and taxes which was Unilever was not expecting at all. This can hurt the internal strength of Unilever such as stable financial performance and cash inflows. There is possibility that government imposes more taxes on Unilever products which reduces its demand and sales, accordingly business profits.
Purchases Function for Low Production Cost
There are several cheaper substitute products available of the Unilever product portfolios and it is the direct external threat of its strength of having diversified and strong brand portfolios. In the time of inflation and unemployment rate, people prefer cheaper substitute products rather spending on the Unilever consumer products (Bagley, 2013).
Unilever is operating in several countries and each state has its own political situation either going through stability or instability. In the both types of political situations, Unilever has different decision making process (Gibbs, 2014). In the highly stable political environment, Unilever always introduce the long-term policies and make the big capital investments. In the time of high political instability, they do not re-invest the capital and save the funds for future opportunities.
Financial anticipation function
In the time of recession or depression, Unilever’s management do not introduce the new products and neither decides for expanding the product portfolios. They also do not engage themselves into the big marketing expenditures and rather decides to keep selling the existing products (Whitaker, 2016).
People are tending towards preparing the home based personal care items to ensure the prevention of chemicals on the body skin which harms it. This social trend has become a major threat for the Unilever and its management which reflects as significant decline in the sales. This social trend is influencing the management of Unilever to create the ads which promotes its skin care products claiming to be made of original natural products (Donald, 2010).
Technological advancement is leading the buyer to place the online order from the retail store. Now, people prefer the purchase of those brands which can be available on the online order at the E-commerce site. Therefore, now Unilever management has also decided to establish strong online presence and on its official website people can place online order for home delivery (Whitaker, 2016). Unilever can take the advantage of its economies of scale and reduce the prices of its products as low as possible to kick out the small producers of the market. But, Anti-monopoly authorities are taking part and imposing the strict check on its pricing policy to refrain from such monopolisitic business practices.
Unilever has been engaged in extensive amount of production and have tons of wastage in the businesses production. This wastage must be removed out through installing the heavy machines which costs big. Legal institutions make the Unilever compulsory to invest for those machines and remove the wastages (Lee, 2012). This makes the Unilever management to establish the funds separately to be investing on those non-productive machines.
c) Reflection of the Study
There will be reflection made for the studies conducted previously and it needs to be done in the following.
Differences and complexities of two businesses in regard to business structures
There is a significant and big difference between the structures of two chosen organization previously discussed. The Unilever’s business structure is more complex and complicated which leads to the several reporting framework (Bagley, 2013). There is a hierarchical structure in placed but also several divisions for the each brand portfolio product. They have many divisions and each of it manages its whole operations itself except demands the help from Headquarters when they need financial resources and unable to find the appropriate and cheaper source of funding.
In this regard, SLH group is having quite simple and one layer business structure in which only one layer of management is involved which commands the employees for working together and achieve what they have to be achieving in order to accomplish the all business objectives. This is a kind of business structure where no confused reporting frameworks are available which can lead to the confusions and fight among the managers and employees (Gibbs, 2014). Therefore, SLH group is enjoying the simple and easy reporting framework which easily manages the performance of its employees. Its small size organizational structure is the most convenient way for it.
Interconnection between different organizational functions
There is a strong interconnection among the departments in the Unilever. Each department is interconnected with the other department and joint efforts of both are collaborating their efforts to achieve the one common organizational goal. Unilever has several divisions and each division is established for performing the business functions related to each product portfolio which needs to be profitable by the end of time period. International organizations achieves the global growth an developments once they are strong at the home country (Harrison, 2016). They establish the good brand name through selling the high quality products / services and people starts recognizing them in the other countries as well due to the electronic media these days and people also frequently visit other countries for the tourism.
This helps them expanding the business into those countries where mostly people knows their brand name and history after the home country (Whitaker, 2016). Unilever is a kind of organization and they have stakeholders including creditors, shareholders, customers, suppliers and others. Organization has responsibility of making the business more profitable and announce higher dividend to serve the interest of shareholders (Harrison, 2016). They have responsibility to design the high quality products and services for the customers so that they can avail the full benefit out of it for what they to the business. Creditor’s interest must also be served as they should be paid by the amount of credit on time with the interest expense as well.
(INVESTIGATE IN MORE DEPTH, DESCRIBE, IDENTIFY, EXPLAIN, ANALYSE, APPLY AND EXPRESS YOUR OPINION IN A CRITIAL WAY)
a)Case Study of McDonald: Supersized me
With the advent of advance technology, human have receiving great progress in almost every sector of life. In the recent few decades, the pace of the development was amazingly increased. In the reflection of this advancement we have received progress in almost every sector of life. Our communication system has amazingly improved as now we have become able to talk and watch to the person from one corner of the world to other corner of the world in real time with the help of intent and social networks.
The most prominent progress made by the human is computer and the most considerable impact of the technology can be seen on the business sector. Computerized technology has enabled the computers to transform their business operations from manual to automatic. The advance development has reduced the burden of work and it has amazingly improved the pace, productivity and accuracy of the business operations (Kaplan & Atkinson, 2015).
After the computer, the internet technology played a real role in our development. With the advent of internet, a new world for the businesses has discovered. Internet has changed the thousands of miles wide world into a Global village and in this global village business can target new market by the use of internet. Therefore, since the advent of internet, many companies have expanded their business from domestic to national level (Kaplan & Atkinson, 2015).
On the other hand, one of the most concerning thing is that the technology has also set new challenges for the organizations such as it has intensified the competition as more options are available for the customers. Secondly, with the advent of technology human have received an easy access to the information and so the intellectual level has amazingly improved. Due to the advance development and enhanced intellectuality the consumer have received great awareness which has created more challenges for the businesses to understand the demand of the consumers (Kumar & Vikas, 2011).
McDonald is one of the organization that been facing the macro environment factor in the form of challenges raised due to the technology. For this discussion, the McDonald’s supersized case study has selected. There are more and better choices are available for the consumers as they concern more things including health before taking their purchasing choice. Among that component one of the certainties is that the general population are turning out to be more health cognizant, consequently, this expanding pattern of health awareness has made more difficulties for the McDonald. Because of this increasing health awareness has become a challenge for McDonald and McDonald has to close more than 350 franchises in America and China (McDonald, 2012).
McDonald is among the most popular universally extended fast food chains that has been working its business in more than 119 nations and serve around 70 million clients through its more than 36000 offer focuses. McDonald is an American based association which was begun in 1940 as a grill eatery. Later in 1948 Maurice and Ricahrd McDonald upgraded their business and changed it as a burger. The most extensive even occurred when Ray Kroc a well-known specialist joined the organization in 1955 as an establishment operator. Beam obtained the McDonald and venture forward to take the McDonald around the world.
The issues with the McDonald have started as people are becoming more intellectual, they are becoming more conscious about their health. Subsequently, in a movie (documentary) named super-sized me a person name Spurlock made himself a subject and made an experiment on his health. He decided to test the effect of McDonald’s product on his health (McDonald, 2012).
Spurlock eat McDonald for around 30 days. Before starting these tests, he went to the doctor for complete physical and medical examination. The doctors declared him physically and mentally fit even his reports shows that he is more fit than other of his age. Following this, Spurlock started to eat McDonald three times a day. After few days he started to feel changes in his body; however he remained determined to eat McDonald for whole month. After completing a month on McDonald, he went to the doctors who made his medical test and found that in these thirty days, his health has greatly changed(EglishFlyer, 2008). Spurlock was diagnosed with Cholesterol, sugar and blood pressure imperfection. He also put on lot of weight. At the end it took him more than a year to reduce his weight but his cholesterol, blood pressure and sugar level never came back to the normal. Through this documentary he succeeds to convince people that McDonald is hazardous for health and it destroys health. Therefore, people reacted strongly and so McDonald had to close it many franchises in America and China (Spurlock, 2005).
Section 1: Identify some positive and negative impacts of the macro environment on the business operations.
In the analyses of the case study, it is found that the macro environment has great impact on the on the business operation of McDonald. Due to advent of technology, people became more health conscious and they stared to demand more healthy food. Subsequently, when people realised that McDonald is not healthy for their. Then people started to avoid fast food of McDonald as they do not want to be over weigh and lose their health. In the result of it, McDonald has to close around 350 Franchise in America and China as well as it is completely banned in 10 countries of the world (Jurevicius, 2016).
On the other hand, this macro environmental factor has also brought a positive change in the decision making process of the World wide famous fast food chain. McDonald started to introduce health food as they realised the demand of the people. In this aspect, McDonald introduced vegetable menu in India. Moreover, McDonald started to offer health food as it made a contract with a new supplier, named Chipotle. Chipotle is famous for providing naturally raised chicken, beef, pork and all the vegetables (Jurevicius, 2016).
Section 2: Conduct an internal and external analysis to identify its core strengths and weaknesses.
In the internal analyses, it is concluding that McDonald’s strength is McDonald’s large network which is spread all over the world. Moreover, McDonald has a strong management team as well as there are large of employees working in McDonald. In developing countries, McDonald is the place where most of the students get their first job. Moreover, it is easily available food that is prepared in no time as well as its products have really good taste.
However on the other hand, the weakness of the McDonald is that its products contain oil and other hazards ingredient that cause obesity and obesity further produce number of diseases. Due to this reason, people started to avoid McDonald.One more challenge has set by the external environment. There are many countries that have different culture; therefore, they do not accept McDonald and China is one of among these countries. Furthermore, due to the health related consequences, McDonald is on the target of law firms.
On the base of it, internally McDonald has a strong structure whereas it has to face various challenges that are mostly set in the external environment.
Section 3: Explain how these strengths and weaknesses are linked to the external macro factors
The challenge set as the health awareness, is created due to the macro factors. To understand this aspect, it is important to understand that technology has completely changed the way of practicing business. Subsequently, technology has also changed the consumer behaviour as people are becoming more intellectual and so they have become more health conscious.
Recently a report was organized FT about with respect to the difficulties of that has been confronted by the universally extend evolved way of life McDonald. As indicated by the report it is said that in the current circumstance McDonald has been confronting its most noteworthy difficulties in home market and in the worldwide and globalized advertise. It is on the grounds that in the impression of the changing shopper conduct the client has turned out to be more cognizant about their wellbeing that has made incredible difficulties for the fast food to keep up its business in the nations like China.
According to a report it is found that because of low sales due to the health concern “Some 350 McDonald’s restaurants have been closed down so far this year – mostly in the US and China.”(FT reporters, 2015)
Section 4: Apply some analysis models -i.e. PESTLE and SWOT/TOWS- in order to develop an in-depth understanding of the impact of the macro environment as well as to justify how this affects organisation’s decision-making processes
McDonald has been offering quality of food products that enabled the company to set its leading image in the industry of fast food. McDonald has long product line based on the fast food but the most concerning thing is that the company has also been offering local food menus that helped the fast food organization to win the local market(McDonald, 2012).
One of the major strength of the company is the globally expand network of fast food franchise therefore, the strong brand image of the company is the most concerning strength of the McDonald
Strong Financial position and Market Diversification
Secondly, the market diversification of the company which is based on the regions strengthens the organization. Company has settled its business in more than 119 countries.
Responsive behaviour of the company is a major strength of the company as recently company has regains its business in India by starting a new marketing strategy by offering local food menu. On the other hand, company strong financial position that enabled company to expand globally.
Inappropriate response to transforming consumer behaviour
This Change in the buyer beahviour has likewise made extraordinary difficulties for the fast food chain McDonald and in the present business setting; it has been confronting awesome difficulties in nearby and globalized advertise.
FT report was established about the challenges that has been confronted by the all around grow evolved way of life McDonald. As indicated by the report it is said that in the current circumstance McDonald has been confronting its most noteworthy difficulties in home market and in addition in the worldwide and globalized showcase. It is on account of in the impression of the changing purchaser conduct the client has turned out to be more cognizant about their wellbeing that has made awesome difficulties for the fast food to keep up its business in the nations like China (FT reporters, 2015).
As per the report it is specified that McDonald has been confronting extraordinary difficulties in China as a TV divert in China explored about the organization and asserted that the organization has been utilizing lapsed meat (Groundwell, 2014).
McDonald has a well-established diversified food chain. Recently McDonald was facing same challenges in India where most of the people do not eat meat as according to their religion meat products are prohibited. Considering this aspect, McDonald revised the marketing strategy of its product line and introduced local food menu that helped McDonald to make its position in Indian market (FT reporters, 2015).
Similarly, to win Chinese Market, McDonald has to be responsive by revising its marketing strategy. In this aspect, recently McDonald has strengthened its relations with a company named Chipotle that has maintained a product line of organic food which is based on the naturally grown product (Chipotle, 2015).
As per the PT report it is likewise specified that the organization has been confronting incredible difficulties by the nearby eateries, for example, the snappy administration offer by the neighbourhood Chinese eateries and quick easy-going of the Chinese eateries has made extraordinary test as the Mr Lavender has said that “Consumers look at alternatives that they are increasingly view as more healthful and safer.” (FT reporters, 2015)
Health consciousness has turned into another real danger for McDonald. In the event that the organization won’t consider it important, then it is normal that the health concious clients will move to different choices that are accessible in the market.
Political external environment affects the business performance and continuity because unstable political environment leaves the business into uncertainty and they are unable to decide which policy they should continue with. Moreover, political instability also shook the consumer spending which directly affects the business sales and profits (Michael, 2012).
Political situations are in the favour of McDonald in most of the countries. However in some countries McDonald is band such as in Iceland, Bolivia and North Korea.
Economics is another external factor which affects the business from outside. Bad economic conditions such as high cost push inflation, unemployment, less consumer spending and high rate of taxation directly leads the business to the bankruptcy. Businesses are not able to be generating enough income to meet the business cost and expenses there. When cost of business output increases due to the limited supplies from the supplier, it also gets the cost of operations expensive and per capita unit cost (Lee, 2012).
Economic factors have great impact on McDonald, however at the current stage, the economic condition are in the favour of the business. It is because; the target market has the capacity to purchase the McDonald products.
Social and cultural
Change in social trends such as lifestyle, habits, interests and other social factors influence over the business performance. It is the people personal pretences which creates the demand and accordingly business idea is developed but when these social trends starts changing and it creates new kinds of demand (Lee, 2012).
Social and cultural analyses have the greatest impact on the McDonald. In most cases, McDonald failed due to inappropriate understanding of the social and cultural sector. McDonald is required to understand the demand of the target market and the social and cultural impact.
A technological advancement is putting the businesses into under extreme pressure because technology is enhancing the business competition and completes the operating cycle in fewer days. It does not allow the delays and suspension of business operations which otherwise leads to the big business losses (Adams, 2014).
Technological factors have greatly influenced the business of McDonald because technology has made available more options for the people. Moreover, technology has created awareness among the about the health. Subsequently, technology has been played a vital role to destroy the business.
Legal framework is getting tougher and tougher with the passage of time. Businesses were enjoying the flexible and relaxed legal conditions before time, now there is not much space left from the legal authorities and they have established the strict legal environment which offers no such relaxation and put the higher amount of fines. Legal framework makes the business compulsory to be working within the laws and its framework (Lee, 2012).
In legal aspect, McDonald is on threat, as the products of McDonald are found as a cause of obesity that further generates health challenges. Therefore the legal sector is challenging. Moreover, the new laws also have forced McDonald to change its business style.
Legal authorities are highly concerned about the environmental issues created by the business enterprise. These concerned environmental authorities are strictly examining the business practices of the all organizations whether or not favourable for the environment. Otherwise, they charge the higher amount of fines to the management (Donald, 2010). This makes the businesses incurring big expenditures to maintain the business operations as such which do not allow the environment exploitation (Groundwell, 2014).
McDonald has also been facing challenges from the environmental factor it required to burn fuel to get energy. Therefore, environmental concern is a challenge and McDonald needs to find alternate solution of it.
b) Main findings from your reports
Through this report, it is found that McDonald has strong internal position however; the impact of the external factor has forced McDonald to change its business practise. Moreover, McDonald did not give concern to the social and cultural factor in its decision making process, therefore, it had to face law suit regarding health consciousness. McDonald has not responded well to the technological advancement and did not amend its menu according to the demand of the people.
It is recommended to the McDonald to give great importance to the social factor in its decision making. McDonald should make contract with the Chipotle to ensure the healthy food for its consumers by making its food good for health. McDonald should focus more on research and development and to avoid such situations in the future, it should focus on keep the business practices up to date.
It is concluded that external factors are not controllable by the business company and its influence them directly, therefore, the survival of the business is associated with the fact that business bring up possible changes according to the external factors. There are different types of business organizations which mainly differs on the basis of capital extensively, structure model, management roles, limited and unlimited liability and many more. Businesses are having strong internal operations cannot be significantly affected with the outside business environment and limited liability means you are liable for the amount of business debt up to the value of shares you hold. However, it is important for the business survival to focus on both internal and external factors.
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