Introduction

Organizations do not operate in a vacuum but rather they thrive in a dynamic environment that has a significant direct impact on how the organizations operate as well as their ability to achieve their set goals. There are various types of business organizations depending on their size, scope, and risks or liabilities affiliated. All these types of organizations are comprised of sets of functions or departments that must cooperate fully for the success of the organization. The organizations interact with the external environment, and these interactions have both positive and negative impacts on the organizational operations and determine the success or failure of the businesses.

LO1: Explain the different types, size, and scope of organizations

Organizations can be differentiated based on their core operational objectives. In this regard, some organizations are primarily set up for profit, while others are charitable organizations whose primary goal is not seeking profits (Hall, 2016). Most of the nonprofit organizations are also classified as non-governmental organizations (NGOs), which are organizations that are set up to serve the public and social welfare with no governmental affiliations (Bendell, 2017). On the other hand, a nonprofit organization is established to serve the public, but the members of the organizations cannot receive a share of the profits or losses incurred by the entity during its operations. The opposite of an NPO and for-profit organization is that in a profitable organization, the shareholders claim a share of the profits and losses of the entity (Bendell, 2017).

Business organizations are of different sizes, starting from powerful multinational brands to micro-organizations, which are all established for purposes of making profits. SMEs are a category of business organizations that accounts for the stack majority of the operational businesses today. This is a category of organizations that are made up of organizations that employ less than 250 people and have an annual turnover of less than $50 million. The employee headcount and the annual turnover are the determinants of entities that fit into the SMEs category (Wirtz et al., 2016).

Every business organization requires deciding on its legal structure since this has a significant implication on its operations, how it raises its funds and its distribution of profits. There are many different types of legal structures that SMEs can adopt, but the most common ones include sole proprietorship, private limited companies, and partnerships (Wirtz et al., 2016).

Sole proprietorships are legal structures in which the business is owned and controlled by a single person. The owner of the business is liable for all aspects of the entity including finances because, in this setup, the owner and the business are not legally separate entities. Therefore, the owner keeps all the profits of the business, but also incurs the losses it may make in its operations. These entities are easy to set up and they generally require a small amount of initial capital and as such, most organizations operate as sole proprietorships during their initial stages of operation (Bendell, 2017).

Partnerships are business organizations that are owned by two or more parties, with the relationship between these parties being governed by a deed of partnership which defines the scope and structure of the partnership, specifies the responsibilities of each partner, profit and loss distribution, and the investment obligations of each partner. These partnerships are similar to sole proprietorships in that they have no limited liability and thus the partners are responsible for the debts of the entity (Bendell, 2017). On the other hand, limited companies are incorporated, and thus they are separate legal entities with their legal status from that of their owners. These companies must have a constitution that helps the shareholders regulate their partnership, and since the company is a legal entity, it can own assets, enter into contracts, and it can sue or be sued at a court of law. Companies can be limited by shares or by guarantee (Wirtz et al., 2016). Those that are limited by shares are owned by shareholders whose financial responsibility in the company is limited by the value and amount of the shares they own, while those that are limited by guarantee are owned by guarantors whose liability is limited to a fixed amount called a guarantee that must be paid in an event the company fails to pay its debts. In this regard, there are two primary types of limited companies: Private limited companies and public limited companies (Hall, 2016).

The primary differences between these two types of limited companies include that the private companies are closely held and they require at least two people to be formed, while the public limited company is publicly owned and traded and it must have at least seven people to be legally set up (Hall, 2016). Also, the maximum membership of a public company is unlimited, with at least three directors, while a private company cannot exceed 200 members with only two of them required to be directors. Shares transfer in private companies is limited while it is free in the public companies, and even though the private companies can opt to have a statutory meeting or not, the public companies are obliged by the law to have such meetings (Wirtz et al., 2016).

All business organizations operate in a field where the market forces of demand, supply, prices, and efficiency are at work. These market forces are governed by the law of supply and demand which is an economic theory that explains the way supply and demand relate to and affect each other as well as other forces in the market. This is a fundamental economic principle that states that when the supply is more than the demand for a commodity in the market, the prices of the commodity falls (Hall, 2016). Conversely, prices go up when the demand is beyond the market supply for the product. This inverse relationship between price and demand brings about the principle of price elasticity where increased prices are typically associated with lower demands while higher demand leads to increased supply. However, different products respond to demand and supply in different ways and as such, there are price elastic products while others have inelastic prices (Wirtz et al., 2016).

LO2: Demonstrate the interrelationship of the various functions within an organization and how they link to organizational structure

The organizational functions of business refer to the things that the business does daily, including production, marketing, sales, research, and billing. The organizational structure of the business defines the interactions and relationship between all these parts and identifies how the chain commands are executed through the different levels of the organization. Most business organizations adopt a functional organizational structure that has a chain of command; which separates the departments of the organization (Bourne, 2016). Such a structure allows all the employees to concentrate on their particular missions, although it can also have a demerit when the different departments fail to cooperate properly and thus the productivity of the company would be negatively affected. Other organizational structures that businesses adopt include a divisional structure with multiple branches where functions are distributed across all the branches (Rosemann and vom Brocke, 2015). This structure is beneficial to the business since most branches will operate almost completely autonomously, but on the flip side, it could introduce a lot of redundancy in the organization. A matrix organizational structure is one that diverts from the hierarchical structures mostly used, and this introduces flexibility in the organization where an employee could work under different managers and with different skilled co-employees (Oyemomi et al., 2016). The downside of this structure is that the chain of command may become conflicted and cloudy, thus negatively impacting the efficiency of the organization. In all these types of organizational structures, the management of the organization must devise a way to relate all the operations of the business with its core objectives and its mission (Oyemomi et al., 2016).

LO3: Use contemporary examples to demonstrate both the positive and negative influence/impact the macro environment has on business operations

Businesses are established to achieve the organizational goals and the mission and vision of the founders. However, as the business grows and continues to achieve its targets, it is surrounded by multiple factors that it must consider and respond to remain within the confines of its long-term benefits and objectives (Groucutt and Hopkins, 2015). There are six main factors that the business has to respond to in its operations and these are entailed in the PESTLE framework. The framework comprises of political, economic, social, technological, legal, and environmental factors (Butryn et al., 2015).

Political factors (P): since all organizations operate with a political setting, the owners of the organization must put into consideration the political factors that affect each activity that the business performs. In this regard, the business should be compliant with all rules and regulations of business operations including policies for hiring employees, lending, pricing, and environmental sanitation among others. The business is also affected by political regulations, political system changes, or instability in the country where it is based (Groucutt and Hopkins, 2015).

Economic factors (E): These are among the most important factors for the operations of a business. These factors include competition and fairness in the market which determines the establishment and operational feasibility of any business venture. The economic factors that affect the business most significantly include the rate of growth of the economy, economic stability, exchange rates, interest rates, and trends in the economy, the tax system, and inflation. The owner of a business must consider all these factors before deciding to set up an enterprise in any market.

Social factors (S): The social factors in this regard refer to the system of values and standards in the life of the people in the community where a business is based and operates. Such values include liberty, social obligations of individuals, justice, and collective responsibility of the community (Butryn et al., 2015). These values are primarily reflected in the political and social lives of the people that the business serves and therefore the owners must analyze these factors to enhance the chances of the business of attracting clients from the community (Butryn et al., 2015).

Technological factors (T): One of the dynamic factors that affect a business by implicating risks and opportunities is technology. New technology creates new opportunities and alternative products for increased competitiveness, while it also threatens the more traditional products in the market (Butryn et al., 2015). When the old technology is made obsolete by new trends, organizations are put under pressure to keep up with the market trends. However, new technology also creates opportunities for easier and cheaper production of high-quality products, thus lowering production costs and increasing profits. Also, new technologies develop products with more features and also open up new markets for the business (Anton, 2015).

Legal factors (L): All businesses must be compliant with different legal requirements of operations to avoid being at loggerheads with governments and authorities. Such requirements include registration policies, taxation laws, employment laws, pricing, and competition, among many others. The business is also affected by government activities, which may cause it to have more opportunities or face more risks (Anton, 2015).

Environmental factors (E): These factors include the geographical location of the business, climate, land, minerals, and many other natural conditions. Since these are important factors in people’s healthy living, they are significant for the business to observe and such issues as pollution have dire effects on the environment and consequences for the business. The business owners should particularly observe trends in the availability of materials, energy costs, and the level of environmental pollution in the location where they want to set up their business (Anton, 2015).

LO4: Determine the internal strengths and weaknesses of specific businesses and explain their interrelationship with external macro factors

SWOT analysis is an acronym for strengths, weaknesses, opportunities, and threats that an organization has in its operations. This is an analysis that is carried out to identify the strengths, weaknesses, opportunities, and threats that face the organization; although most of its critics cite the inability of this analysis to showcase the relationship between the different factors and categories. For instance, some threats that the business may face have the capacity to make its weaknesses more profound (Anton, 2015). However, this is an important tool for the business to use to match its internal and external factors to help in the identification of strategic options that the organization should pursue. It also helps the management to respond to the results by taking advantage of the opportunities while minimizing the threats and weaknesses, as well as exploiting its strengths. As such, SWOT is an important tool for strategic planning (Phadermrod, Crowder and Wills, 2019).

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