Unit 1: Business Environment Organization Purposes

Unit 1: Business Environment Organization Purposes

Unit Description

This is a Business Environment Organization Purposes Assignment in which we discuss organizational types, objectives, national and market environment.

Introduction

The business environment is ever changing however key aspects never change. The diagram below shows the business environment. Organisations have to be aware of their competitors, the industry as a whole and the wider environment. All of these factors affect the running of organisations and need to be studied as a result.

LO1: Understand The Organisational Purposes of Businesses

Q1.1 Identify at least four different types of organisations that exist in the U.K.

Select two types of organisations from those identified and state their purposes.

A description of an organisation: An organisation can be defined as a social or business unit, which comprises of people working together to achieve a common objective or goal. This goal can be either driven by profit motive or non-profit motive. Organisation is managed through an organizational structure with people having different roles and responsibilities managing the operations of it (Nickels et al, 2011).

Identification of four different types of organisations in the U.K. This could include defining their legal structure;

Four different type of organisation in UK are:

• Sole Traders: This type of business organisation is widespread in UK. It is mainly owned by a single person, decision making is quick in this type of organisation. Entire profit goes to the sole trader or owner of the organisation.
  • Legal Structure: this type is easy to setup with minimum paperwork required. The sole trader has the entire liability of the business i.e. he/she is responsible for all the debts and profits of the organisation. Sole trader within the framework of law has to prepare and produce an annual accounting return for the purpose of accounting to the Inland Revenue.
  • Purpose: Primary purpose of this type of organisation is to earn and maximize its profit out of the revenue earned. Through whatever services being offered a sole trader’s main motive is to earn maximum profit within the legal framework.

• Partnership: In United Kingdom partnership is also a popular form of organisation. Partnership is forged between two to twenty partners. Thus with each partner in the business contributing to growth of the firm through his unique skill set or money investment. Impact of profit and loss is distributed across all the partners depending on their stake in the business.
  • Legal Structure: Partnerships between partners is setup through ‘Deed of Partnership’- a legal document which is made by the partners and witnessed by a solicitor. This deed legalise the entire partnership between all the partnership for example, their responsibility, profit sharing ratio etc.
  • Purpose: Purpose of partnership is to setup a business through a collective effort (or investment) where every partner get his share of profit (or loss) based on his stake in the organisation. This type of organisation helps in distributing the risk based on the investment made by each partner.

• Companies: A company can be defined as an association or collection of individual which is owned by shareholders, who have authority to appoint the director of the company to run its operation.
  • Legal Structure: A company has to be registered through various documents at Companies House in Cardiff. These documents such as Memorandum and Articles of Association clearly identifies and sets the internal and external relationship within company.
  • Purpose: Purpose of the company is to offer a service or product to its customer along with ensuring that interest of all the shareholders remains safe.

• Franchising: This type of organisation is focused on hiring out or licensing of the core business idea, product or service to another party (franchisee) after the franchisee pays a license fee and various other cost to get a permission to use that brand or service. KFC is a typical example of this model.
  • Legal Structure: Legality of this type of organisation is setup through formal agreement between Franchisor and Franchisee. Franchisee pays a specific amount of money for use of the brand, expertise and various other aspects related to the Franchisor.

Q1.2. Select an organisation of your choice and describe the extent to which this organisation meets the objectives of its stakeholders.

Selected Organisation: For this task selected organisation is Admiral Group plc. This organisation is a motor insurance company which has its head office located in Cardiff, Wales. Admiral group is also listed on the London Stock Exchange. With operations spread across 8 countries, Admiral group employs over 6600 people (Knight, 2010).

Stakeholder: A stakeholder can be defined as a person or an entity which has certain stake in a business organisation or a project. In case of a business organisations behaviour, stakeholders might not have interest in company’s day to day operations, however they are definitely impacted with company’s performance and growth. It can also be defined as a third party which has made significant investment or provided funds for the expansion of the company (Ramirez, 1999).

Different stakeholders for Admiral group are as follows:

• Admiral’s group board: Admiral’s group board comprises of all the executive positions which are responsible for company’s growth and operations. Various roles which are covered in the board are, Non-executive chairman, COO, CEO, Non-Executive Director, and CFO.
  • Objectives: Objective of this type of stakeholder is to ensure smoothness in the key decision making process, and efficient management of the company.

• Employees: Admiral Group has approximately more than 6600 employee working across 8 countries. Employees can be categorised as internal stakeholders. In 2013 Admiral Group decided to distribute 1,500 GBP shares to its employees via its Employee Share Scheme, which in turn makes all its employee as shareholder as well.
  • Objectives: This type of stakeholder i.e. employees are important for an organisation, as they are the one who drive the growth and expansion of the company. Their main objective is to perform their designated responsibility and add to company’s overall efficiency and productivity.

• Shareholders: Shareholders are one of the most important external stakeholders of the company. For Admiral Group shareholders have been a key component of its growth strategy. Shareholders invest in the company, and through investment received from the shareholders, company charts its growth path.
  • Objective: Main objective of shareholders is to gain profit from company’s growth. Thus more the company grows and expands, better is the profitability for the shareholders. Through board of directors shareholder are aware of company’s growth, and based on the situation from time to time, shareholders raise their voice of concern regarding any poor decision made by company’ board.

• Subsidiaries: With more than 23 subsidiaries, Admiral Group has vast line of business spread across globe. These subsidiaries plays and important role in growth of company. Thus making them an important stakeholder in Admiral Group.
  • Objective: Subsidiaries are more of an internal stakeholders, however their prime objective is to deliver the services or the product with best operation efficiency as established by the parent group. These subsidiaries also have to ensure that they are profitable for the parent group.

Admiral Group’s effort to meet objectives of its different stakeholders is as follows:

• Through its well-structured board of directors and corporate governance practises, Admiral Group has been actively ensuring that its board group’s objective of smooth decision making process and other important aspect are met without any delay or roadblock. That is why its board has complied with the code of conduct in all respect in 2012. With its comprehensive programmes of meeting and dialogue it has ensured that objective of efficient management is met properly.

• Admiral group has been working relentlessly to ensure that all its subsidiaries are performing in sync with company’s core objective of diversification and maintaining profitability. Through its flexible management approach the core parent group has been handling its subsidiaries. It has also established a second layers of management in these subsidiaries to ensure that there is no inefficiency in decision making process.

• For its shareholders, Admiral Group through its timely annual reports have been informing the shareholders about its growth. In 2013 it pain an interim dividend of 48.9 pence per share to its shareholders. Hence through dividends, profitability and timely communication Admiral Group has been meeting objectives of its shareholders.Order Now