Business environment is a collection of various factors, out of which some of them may not be in control of organisation but they influence the performance, profitability and growth of entity. It can also be said that these are the internal and external factors that affect the operations of an organisation. The internal factors influencing a business entity are employees, suppliers, shareholders, customers whereas the external factors comprises of government policies, economic conditions, technology, rival business entities, laws and regulations. The present report is based on General Motors which is an American multinational company that manufactures, designs and sells vehicles and their parts. The enterprise is headquartered at Detroit, Michigan, America. This report discusses about the different types of organisations along with their size, scope and legal structure. Also, it includes the interrelationship between various functions of an organisation. Along with that, the macro factors and their strengths and weaknesses in context of business is highlighted in t
P1 Different types and purposes of organisations
Various types of organisations carries out operations in an economy. Such entities are public, private and voluntary organisations. The purpose and legal structure of these organisations are discussed below:-
Public Organisations- These are the organisations that are partially or wholly owned, maintained and controlled by government and other related entities. Public organisations work for the welfare of people and deliver products and services to render benefits to society. The organisations belonging to this sector provides wide range of services like education, communication, infrastructure, transportation and health services. For instance, Crown Prosecution Service is a public prosecuting organisation situated in England and Wales which conducts criminal prosecutions.
- Legal Structure: Public organisations are those that are wholly or partially run by the control of government. Now, government in an economy are generally of 3 types which are national, state and local government. The legal structure of public enterprises depend upon the kind of government running, managing and controlling it. Thus, public organisations are broadly classified into three categories:-
(A) Local organisation: The major administration and controlling authority of these organisations is Local Government.
(B) State organisation: This is an organisation which is owned, managed and controlled by the State authorities.
(C) Central organisation: These are those organisations that are managed and controlled by Central Government.
- Purpose: Crown Prosecution Service (CPS) is a public prosecuting agency that conducts criminal prosecutions in England and Wales. The entity prosecutes those criminal cases upon which investigation has already been carried out by police and other investigation organisations. Their major purpose and duty is to ensure that criminals are prosecute for the offense they have committed and offenders are brought to justice.
Private Organisations- These are the organisations that are owned, run, managed and controlled by individuals, group of individuals, firms, companies and other financial institutions. Private organisations are generally incorporated for the purpose of profit making. For starting a private enterprise, a suitable organisational structure is selected and then the operations are conducted with an aim to create a loyal customer base. For instance, General Motors is a multinational company headquartered in Detroit, Michigan, America. The company designs, manufactures, markets, and distributes vehicles and vehicle parts. Also, it sells financial services.
- Legal Structure: The legal structure in relation to private organisation is explained below:
(a)Sole Proprietorship- It is an entity which is totally owned and managed by one person known as sole proprietor. There is no legal distinction between owner and business enterprise.
(b)Partnership- It is a written agreement between two or more parties that agree upon conducting business operations together with an aim of making profit or any other reason priorly mentioned in the contract. Partnership is broadly classified into two types, namely, General partnership and limited partnership.
(c)Company: It is a form of organisation that comprises of various individuals which do not offer and issue shares to public by way of Initial Public Offer. These entities run for the sole motive of profit making.
- Purpose: General Motors is an American multinational company dealing in manufacturing, designing and distribution of automobiles and its parts across the globe. The fundamental purpose of this company is to hire talented and competent workforce and then directing their behaviour towards accomplishment of organisational goals. Their primary focus is upon customer satisfaction by delivering services that are best to their potential.
Voluntary Organisations- This is an organisation that comes into action when a group of individuals voluntarily enter into an agreement to form an entity with an aim to achieve a common desired goal. The objective behind formation of these enterprises is generally not profit making. Such organisation include charitable trusts, foundations, religious corporations, not for profit and non government organisations and trade unions. For instance, Oxfam is a confederation comprising of 20 independent charitable organisations which are working towards elimination of poverty across the globe.
- Legal Structure: The legal structure of voluntary organisations is explained below:-
(a)Unincorporated Association: It is an organisation created by signing of an agreement between a group of individuals who come together for a reason other than profit making. The members of such organisations are personally responsible for any contractual obligation.
(b)Trust: Trust is an arrangement between three parties where trustee has the right to property for benefits of beneficiary.
(c)Limited Organisation: This is a form of voluntary organisation which is limited in terms of number of members or their share in organisation.
- Purpose: Oxfam works towards the eradication of poverty. The major purpose of this organisation is to create reliable solutions to the problem of poverty. The vision of company is a world without poverty.
P2 Size and scope of different type of organisations
The various types of organisation that conducts business operations within an economy are public, private and voluntary organisations. The size and scope of such organisations may vary in accordance with their scale of operations. The discussion about size and scope of various forms of organisation is below:-
Public Organisations- Those enterprises which conduct its operations under full or partial control of government are called public organisations. Crown Prosecution Services is a non-ministerial department which prosecutes criminal cases in England and Wales wherein the initial investigation has already been conducted by police or investigation authority. Its size and scope is explained below:-
- Size: CPS conduct its operations in England and Wales. The organisational structure is comprised of 14 regional teams which are involved in criminal prosecution. Each of these 14 teams is headed by Chief Crown Prosecutor. The organisation employs 6000 persons.
- Scope: CPS has a scope of employing the process of digitalisation in their operations to ensure faster flow of information within and outside the organisation.
Private Organisations- The enterprises that conduct its operations without much government intervention in ownership, management and control are referred to as private organisations. General Motors headquartered in Detroit, Michigan designs, builds and sells cars, trucks and automobile parts across the globe.
- Size: GM has a staff of 207,000 people across six continents of the world out of which 140,000 are hourly employees and 67,000 are salaried. Overall, the company provides 158 different kinds of facilities all across the globe. Company manufactures vehicles and its parts to gain loyalty of customers in over 120 countries around the world. The company tops in two of its most potential markets, US And China where it sells the highest number of vehicles.
- Scope: Company hires only skilled and competent employees who possess the potential of taking the enterprise to more heights in terms of services delivered to customers. Its employees speak more than 50 languages and live in 23 different time zones. General Motors has a high scope of growth and expansion across various countries of the world where it has yet not reached the customers for delivering services.
Voluntary Organisations- These are the organisations which are formed by a group of individuals who voluntarily come together for the accomplishment of a common desired goal. Oxfam is operating on the same principle and they work for upliftment of poor people.
- Size: Oxfam is conducting its operation in around 14 countries where they work towards ascertaining various social problems faced by people and aiming at eliminating the same. A number of volunteers are a part of Oxfam and they are helping the company in providing services for the social welfare and upliftment of people.
- Scope: Oxfam can think of expanding its business in terms of offering its services in relation to eradication of poverty in countries where they have not explored yet.
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. 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 and 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.
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 are 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.
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.
- 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.
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. 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:
· General motors has diversified portfolio for their products with different subsidiaries which assist to geographical presentation.
· Company is focusing on smart technologies through innovative activities in designing and developing process of goods.
· Moreover, general motors established environmental friendly policies which fascinating to potential customers.
· In recent years, several vehicles are recalls due to faulty auto-mobile parts which had impact negatively on its GM's image and decreased profit share.
· During generating underfunded problems, financial positions are directly affected in General Motors enterprise.
· Company is more dependant on U.S. Sales for generating maximum revenue.
· Company is growing at global level in automotive industry, so here several chances to receiving maximum opportunities from potential market.
· Secondly, market has surplus demand in electrical and fuel vehicles which are leading to more production to fulfil GM's customer requirements.
· GM enterprise has re-entered in US market with an agreement so this is another expected door top increasing profitability.
· Extreme level of competition through rivals which highlighting many threats for General Motors such as market share, margin and so on.
· An auto-mobile industry affects when it runs business plan globally by following stringent governmental laws such as competition law and environmental legal obligations.
· Moreover, General Motors influences by exchange rate fluctuation in different countries.
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:
Strength - 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.
Weakness - This factor would effect 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 effect 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 influence, different taste and preference can effect the decision making of the general motors. Social factor would help in the welfare and development of the people as well as society.
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.
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 particular product or services. As a result, it can effect the purchase behaviour of an individual. Because it may effect their budget or cost of purchasing the products of the General motors.
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.
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