The businesses work in the environment which consists of macro and micro and influences the working of the companies. The unit is based on public, private and voluntary organisations. JP morgan finance and investment has appointed client manager to investigate types of companies and their organisational structure.
- Different size, types and scope of businesses
- interrelationship of different functions of businesses
- macro and micro environment analysis
- internal strength and weakness and its interrelationship with other macro factors.
Focusing towards business environment, the concept is quite wide encompassing factors that are internal and external to the business significantly impacts the working and functioning of the organization. Firms operate in the environment which has two distinct sub-parts i.e. micro and macro. Both these environments are inter-related with each other and their influences on the functioning of the business are based upon the type of the firms (Daft, 2007). Therefore, it is necessary to evaluate the environment for the purpose of fostering easy flow of activities. The current research is also concerned towards analyzing varied types, scope, size, structure of business organizations. For this purpose, case study of JP Morgan Finance and Investment is being taken into consideration. It is one of the UK’s leading investment company commercial, industrial and market financial banking and services. As a Client Manager of JP Morgan, various types of companies will be analyzed as a client of the firm. The report will also throw light on inter-relationship between varied functions and will demonstrate the influence of macro-environmental factors on the business operations. The later part of the report will focus on identifying the internal strength and weaknesses of JP Morgan and will explain their inter-relationship as well.
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TASK – 1
Different types, size, and scope of organizations
Talking in reference with organization, it is defined as an entity which encompasses multiple people like association or institution and has a common goal along with a link to the external environment. In other words, two or more people combines and work together to achieve a common interest. Further, it is very important that firms should be formed with some purpose, as it serves as guide to the business and it is the main root for many other types of decisions (Brooks, 2003). The main purpose of each and every organization is to achieve their mission, vision and goals being decided and indicated at the time when the firm is formed. However, it surely varies with the types of firms but on a whole there main aim is to render services to their clients along with achieving their own growth with the passage of time. In an economy of a nation, there are three main sectors i.e. primary, secondary and tertiary sectors. In the primary sector most of the people are employed in agriculture and production of food. The secondary sector is mainly related with offering finished goods like clothes, toys, factories and food. Tertiary sector is mainly concerned with providing intangible products and services to the customers such as banking, tourism, retail and IT services. Throwing light on the economy of UK, it is highly developed as well as market oriented (Pettinger, 2017). In UK, tertiary sector has a major dominance in the economy. However, primary and secondary sector too exists but they comprise only 20-40 percent in the total size of the sectors. The classification of different types of organizations is being described underneath:
- Sole trader – It is being defined as a business which is being owned by on person and has full control over the business. One of the major advantages of this type of firm is that the profits from the business are retained by the sole trader. Further, decisions are taken quickly, as he is only person liable to make decisions and plans. However, Sole traders are not seen as a separate entity and thus, they are subject to unlimited liability. It becomes also difficult for them to raise finance as well. For example, a doctor is practicing home healthcare (Heinz and Koontz, 2010). He is the sole trader of his business and belongs to the tertiary sector, as he is offering intangible services to the customers.
- Partnership – In partnership, two or more person combines and works together for achieving common interest and goals. One major benefit of partnership is that there will be availability of more capital and there are also limited external regulations. However, it involves high risk of disagreements and each and every partner is liable for actions of other partners. For example, in a restaurant business, two or more people combines together and make investment. This industry belongs to the secondary sector as they are using raw-materials from primary sector and manufacturing the products (Robbins and Coulter, 2002).
- Limited company – Speaking about the limited companies, it is being defined as a type of a business structure that enjoys limited liabilities and is being owned by shareholders and guarantors and managed by the owners. It has a separate legal entity from the owners. Furthermore, even the finances of the business are separate from the owner’s personal finances. One of the major benefits of limited company is that it has limited liabilities and financial security. Moreover, it has separate legal entity. On the other hand, it involves complex as well as restrictive rules related to accounts and book-keeping. Warburton’s a baking firm of UK is a perfect example of limited company which belong to secondary sector (Huczynski and Buchanan, 2000).
- Public Limited company – It is a legal designation of a limited liability company which has offered their shares to the general public and enjoys limited amount of liability. The stock is offered to the general public and can be acquired by anyone privately, at the time of initial public offer or through trades on stock. The finances of the public limited companies are separate from the personal finances of their members. They must have two or more shareholders, must have issues their shares in public, registered at Companies House and must have at least two directors. The ability to raise capital by issuing public shares in one of the biggest advantages of public limited companies. In addition to this, there is big potential for growth (Aidan, 2016). However, there more regulations involved and it demands high transparency in terms of accounting. For example, Rolls-Royce is a public limited company and falls under the secondary sector of the economy.
- Government and Charity – Government and charity organizations have a sole aim to support and help the general public. These are voluntary organizations or associations being formed by the collaboration of two or more people. The main purpose of these firms is to serve the community by employing their best efforts. For example, National Child Birth Trust (NCT) is one of the leading UK based charity. These types of firms fall in the tertiary sector, as they are offering services to people which are intangible in nature (Wren and Bedeian, 2009).
Thus, to conclude it can be said that there are many types of organization and each of them has different purposes, advantage and disadvantages according to the type of business they are engaged in. except the sole trader, all have one thing in common that they are being formed by the association of two or more people. Further, the risk involved in the business varies with their size and scope of business.
TASK – 2
Definition of Organization structure
Articulating in relation with the organizational structure, it is being defined as a way of arranging people and their jobs in order to accomplish the work task as well as to achieve pre-determined goals and objectives. In a company, where wok group is too small and face to face communication is very frequent then there is no need of formal structure. However, in large firms it is not possible (Ivanko, 2013). Decisions have to be taken regarding delegation of authorities and tasks in larger organizations. Therefore, required procedures are being established for different functions. Through these decisions structure of the organization is being determined. In each and every firm, irrespective of their size and complexity, responsibilities of the employees are defined by the type of work they perform and to whom they report. Overtime, all these definitions are allocated to positions in the firm rather than to a particular individual (Huber, Herrmann and Morgan, 2010). The most suitable and best structure of the firm is based on several factors like size of employees, type of work firm performs, geographic dispersion of amenities and range of business.
Two types of organizational structure
Classical organizational theory
This theory is evolved during the first half of this century and it significantly reflects the merger of scientific, bureaucratic and administrative theory. According to the classical organizational theory, firms are considered as a machine and human beings are its important elements. The classical theorists were of the view that efficiency of the firm can be increased if the human being involved with the firms increases their efficiency. They focused on specialization as well as co-ordination of activities (Classical organizational theory, 2018). Many writers have laid attention on efficiency at the top level and many at lower level and thus, this theory has given two streams administrative and scientific management. Further, this theory is based on four principles:
- Division of labor – It suggests that work should be divided to obtain specialization so as to improve the performance of the business.
- Functional and scalar process – It refers to the growth of duties, chain of command and obligation to report. It helps in generating superior-subordinate relationship among the organization.
- Structure – It defines the framework of formal relationship between various tasks within the firm and its people (Types of organizational structure, 2018).
- Span of control – It signifies the number of people a manger can control at different levels.
This structure is based on the classical theory of organization. In this type of structure, the tasks of similar nature are being categorized in one department based on their functions. It is suitable when the firm is quite large and operations within the firm require high degree of specialization and at the same time it has diversified activities as well (Lake, 2009).
In this type of organizational structure, the activities are being grouped on the basis of their products. This includes separate business units or divisions. Furthermore, each and every unit has different divisional manager who is held liable for the performance and has all the authorities of that particular unit (Kolk and Van Tulder, 2010). Divisional structure is apt for the firms having large variety of products
Relationship with other functions
Every firm has different scope, size, industry, sector and purpose. Even companies operating in the same industry and sector are different from each other and this difference is created through structure and allocation of functions. Organizations have some functions in common in this dynamic and complex business environment such as production, human resource, marketing, finance, operations and information technology. All these functions have some or the other relationship with each other even though they have different work performance (Pandey, 2013). Activities and issues in one function will surely damage and ruin the functioning of the other departments as well. Explanation of these functions is being described underneath:
- Human resource – The human resource function is quite significant as they are considered as one of the most vital asset of the firm. The heart of the firm lies on its people and this function helps in providing training and development as well as to recruit right people at the right time and place. They also help in determining the salaries of different positions in the firm.
- Marketing – It is quite important for the firm to aware their target customers about the company’s new products and services. This can be done seeking help from this function of the firm through promotional and advertising activities. Thus, this department is held liable for promoting the business of the organization and generating sales (Banica and Hagiu, 2015).
- Operation – This is also an important function of the firm which is responsible for planning, designing, overseeing and controlling the process related to production and redesigning business operations in the manufacturing of products and services.
- Finance – This function is crucial, as they are responsible for accounting, auditing, planning and organizing the finance of the firm. Cash flow is the life blood of any business and it is crucial to manage the cash inflow and outflow of the business to achieve success and growth (Sevilla, 2015).
- Information technology – Nowadays, each and every business requires information system and computers for quick and easy functioning. This function is now regarded as the backbone for smooth operation. They provide help to the firm by developing software for other departments
In the above paragraph, various functions of the firms are being described in brief. All these different functions are inter-related with each other. For instance, if a firm want to expand their business in different market than the first thing they will require is efficient human resource. In addition, there will be a need of marketing team to analyze the market that can be targeted and will carry out market research for the same. Further, operation function will plan and design the products that suit the demands of the customers (Jurigová, 2016). IT department will provide support by developing software for various departments and finally, budget for manufacturing new products and their launch has to be sanctioned by the finance department. Thus, it can be said that each and every department is inter-connected with each other.
TASK – 3
These are considered as one of the important macro forces as it identifies the extent to which the government and its related policies and procedures influence the organization and its particular industry (Jacob, 2013). It generally encompasses political policies, fiscal, taxation, trade policies, environmental laws, labor laws etc. In each and every business, politics plays a major role. This pertains to the fact that there is a balance amid free markets and systems of control.
Positive and negative impact on business
Political factors can affect the business positively and negatively and thus, it has given lot of significance by the business. There are different aspects of government policies that can influence the business and thus, it is vital to follow all rules and regulations. These factors can add a risk factor and lead to major loss to the firms. For example, increase in tax might prove positive for some of the firms and negative for others. This rate of taxes directly affects the demand pattern of the business (Hall, 2012). JP Morgan is related to financial services and thus, to operate effectively, the rules and instructions related to banking regulations, employment policies and taxes must be analyzed properly to serve well in the financial services industry. If the government policies are growth oriented than JP Morgan can earn high profits. This is because of the fact that there will be low rate of interests, currency exchange stability and competitive tax arrangements.
Economic factors are those macro forces that have a significant influence on the economy and its performance (Cavusgil and et.al., 2014). This in turn directly affects the firms and their profitability. It includes various factors such as unemployment rates, employment rates, interest rates, cost of raw-materials, foreign exchange rates etc.
Positive and negative impact on business
Business can be affected by the economic trends on a large scale. In the financial sector, the dimension can be growth in population, financial crisis, urbanization rate and unemployment rate. JP Morgan is required to focus on these factors in order to realize the profits terminologies. The economy of any nation follows a trend of business cycle i.e. boom, stagnation and decline. At the time of boom period, there will be more jobs and more workers will be required to keep up the demand (Gupta, 2013). On the other hand, when unemployment is high, consumer spending will be low and sales of the business will be highly affected. For example, if there is rise in the inflation i.e. increase in the prices of economy, there will be increase in the expenses of business such as rent, utilities, cost of raw-materials etc. Rising costs will ultimately force the firms to raise their prices of products and services and will reduce the purchasing power of the public.
These factors are also known as socio-cultural factors which involve the shared attitude and belief of the population. It encompasses several factors such as age distribution, growth in the population, career attitude, health consciousness etc. They directly influence the way marketer understands the customers and the things that drives them.
Positive and negative impact on business
These factors significantly involve target customers of the firms, taste and preferences of these customers, their attitude, value and beliefs. In addition to this, these factors also have a power to influence the demand and supply of business of the firm (David, 2004). If the company is manufacturing products and services according to the taste and demand of the customers then it will influence the firm in a positive manner and vice-versa.
In this current landscape, technology is changing at a fast pace and is also altering the way companies market their products and services. It impacts the business in three different ways such as ways of manufacturing and distributing the products and services and communicating with the target markets.
Positive and negative impact on business
Technological factors include new skills, knowledge and technology being required to produce goods and services. These factors influence the business decisions both in a positive and negative manner. Seeking help from the advancement of technology, the overall productivity of the business has increased a lot (Margea, Hurbean and Artene, 2014). This is because of the fact that it has increased the ease of transferring data between various units easily. However, once the technology has implemented within the firm and to all its daily operation, it is very difficult to remove, as it will have dire consequences on the business and it might fail too.
Environmental factors are concerned with the surrounding environment and influence of ecological aspects. It encompasses factors such as recycling procedures, CSR activities, climate, carbon footprint, waste disposal and sustainability.
Positive and negative impact on business
If the JP Morgan will pay attention on the ecological aspects of the business than they are more likely to have good market shares in the financial service industry (Andrejovská and Bánociová, 2014). However, if there is no sustainable business practice being adopted within the business, it will soon lose its attractiveness.
It is quite important on the part of organization to comprehend the things which is legal and being allowed within the territories in which the business operates. It includes factors like health and safety, trade regulations, employment legislation, consumer law and restrictions etc.
Positive and negative impact on business
The legal factors can significantly influence the mechanism through which the firm operates their business. For example, employment law dictates the way employees should be treated within the organization (Worthington and Britton, 2006). This can influence the productivity and working of the business. If all the legislations and rules are followed than there will be smooth flow of activities and business can prosper.
Thus, it can be said that PESTEL analysis is a tool that helps in determining the macro forces being faced by the organizations. The acronym PESTEL stands for political, economic, social, technological, environmental and legal. In case of marketing, before execution of strategic plans and tactics, it is quite necessary to carry out situational analysis and this tool forms an important part of this analysis. It helps in identifying the changes in the market.
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TASK – 4
It is being defined as a framework which is used in order to evaluate the competitive position of the firm. The acronym stands for strength, weakness, opportunities and threats. Seeking help from this analysis a business can develop full awareness in regards with all the factors that are involved in a decision (Palmer and Hartley, 2006). It is just a tool for analyzing the current landscape in which the business finds itself. Through this the business can improve their operations by highlighting and working on their weaknesses and can grab the market opportunities using their strength. Furthermore, it also helps the firm in shaping their business strategies by offering a new perspective.
It significantly describes the positive aspects and attributes whether tangible or intangible, internal to the company. They are within the control of the business. For example, JO Morgan his a trusted brand and has good financial position in the areas of finance and business. Further, the number of employees is more than 250000 and has maintained its good and large retail network (Haseeb, 2015). In addition to this, it is one of the largest banks in US in terms of assets, sales, profits and market value.
These are those characteristics of the business that places or shifts the firm at a disadvantage in comparison to other firms. In order to compete effectively with the competitors, the company is required to work on and enhance these areas. JP Morgan faces problems while carrying out strict financial competition with other financial service firms. In addition, because of their instability in the financial matters, the market results are fluctuating and this comprise the major weakness of the firm (Pascale, 2000).
Talking in relation with the opportunities, these are external attractive factors that reflect the main reasons behind the growth and prosperity of the business. In other words, it explains the opportunities are being available in the market or environment that can be benefited to the firm. For example, If JP Morgan desires to expand their business than they need to step into the market of emerging economies of the world. Further, the firm can also start commercial banking for their valuable customers (Haseeb, 2015).
These are being defined as those elements that can trouble the whole business and its operations. These factors are beyond the control of the business and can place the strategy as well as the whole business at a great risk. For illustration, because of the change in government regulations, there can be financial crisis like recession. In addition to this, JP Morgan deals or faces the mortgage market, which is quite unstable. This can damage the business of the firm while dealing with the issues related to finance (Schirone, 2012).
Inter-relation of Strength and Weakness with Macro and Micro factors in business decisions
Focusing towards the strength and weakness of the firm, they are inter-related with the macro and micro factors and significantly influence the business decisions as well as internal decision of the firm. The management of the firm makes comparison of their strengths with the prevailing macro-environmental factors such as political, environmental, social, technological, legal and economic and afterwards, strategies and operational plans and policies are being formulated. A sudden alteration in the environmental factors will significantly influence the decisions being taken by the company (Hansen and Nohria, 2004). For illustration, the economic factors takes into consideration inflation rate, exchange rate and change in interest rates in the market. If the financial condition of the company is sound and feasible then a change in these rates will not affect the pricing as well as marketing strategy of the firm. Further, for facing the challenge of changing taste and preferences of the customers, it is vital that the firm should have good staff, viable natural and financial resources. The firm should have strength to fulfill the preference and demands of the customers. Thus, it can be said that strength and weakness are inter-related with the macro-factors and influence each other considerably.
Talking in concern with the internal factors, it encompasses various elements such as investors, customers, workers and competitors. Change in all these factors can influence the internal decisions of the business organizations. For instance, investors are referred as those people who provide financial resources to the firm and if there is change in the rate of interest of investors then the financial policy decisions of the firm will be highly affected. Similarly, workers are the asset of the work and no company can work without them. They have direct impact on the decision of the company (De Ruijter, 2014). Finally, a change in the taste and preferences of the customers can significantly bring varied economical alterations within the organizations. Therefore, it can be said that micro factors too impacts the internal decisions of the firm and impacts the success and growth of the business as well.
On a whole from the above discussion it can be said that both macro and micro-environmental factors plays a crucial role in the business decision making process. It is vital on the part of the firm to determine their strength and weakness; as if they fail to do so then they will not be in a position to evaluate their macro-environmental factors. The company cannot formulate strategic plans and tactics for future development and growth. It was also significantly analyzed that all these factors influences the operation of the firm and internal decisions of the firm as well.
Purpose and function of Human Resource Management
Impact of law on the businesses
Unit 2 Business and The Business Environment - Higher National Diploma in Hospitality Management