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Business and Business Environment

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Introduction

A business environment defines the factors which affect the way an organization runs its

operations. These factors can be internal or external. This essay aims at analyzing the size, scope

and different types of business organizations. The essay also analyzes the interrelationships of

various functions of organizations which link to the structures of their business. Lastly, this essay

will analyze the effects which influence the macro environment of a business. 

LO1

Types and Purposes of Organization

There are several types of organizations depending on their operations. Public

organizations are organizations that offer services which are meant for social purposes and may

include the not-for-profit government-owned organizations (Raharjo and Eriksson 2017, pp.

1799; Groeneveld & Verbeek 2012, pp. 355). The purpose of these organizations is to deliver

governmental services such as public infrastructures, military services and other public services

and goods which are meant to make the society better (Raharjo and Eriksson 2017, pp. 1799).

Operations of public organizations rely on paid staff (Caemmerer & Dewar 2013, pp. 1454;

Groeneveld & Verbeek 2012, pp. 378). These organizations raise funds for their services through

various methods including financial transfers from other levels of governments and taxes.

Private organizations include organizations owned both by the government and private

bodies such as groups and individuals. These organizations are formulated for the sake of

making profits and are hence referred to as for-profit organizations. Private organizations aim at

making profits for their stakeholders; hence they are fundamental to the economic system of a

country (Caemmerer & Dewar 2013, pp. 1454). The private organizations also widen the GDP of
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a country by generating the per capita income (Raharjo and Eriksson 2017, pp. 1800). Thus, they

are important tools in the growth and development of a country.

The volunteer organizations, on the other hand, refer to nongovernmental, not-for-profit

organizations that aim at offering social activities. Their sole purpose is to enrich the society by

offering a wide range of services without any return for profit. These organizations contribute to

the development of society by creating social wealth for the society. Volunteer organizations are

not governed by the state; rather, these organizations are governed by a board of unpaid trustees.

Also, membership in these organizations is not prescribed or inherited. Volunteer organizations

depend on regular or occasional volunteer workers. The staff may be or may not be paid.

Legal Structures

There are four types of legal structures used in business. The first legal structure is

general partnership. This legal structure is formed when two or more individuals come pull their

resources together to start a business. In general partnership, the management of the business as

well as profits and losses are shared equally among the partners. The partners obtain a formal

partnership agreement which has the terms and conditions of the agreement and incase of debts,

each partner becomes equally liable for them. The second structure is limited liability (Caramela

2018, n.d). This structure is formed when one or more people start a business through a special

written agreement. A limited liability company‘s agreement details include information about

distribution of profits and losses, provisions of management as well as allocation of tasks and

interests.

The third legal structure is sole proprietorship. This is the common form of business

structure where an individual decides to start a business either alone or with his spouse. This type
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of business is easy to establish and operation. The business owner(s) of such businesses enjoy

fewer taxes, and legal controls. Also the owner can decide how he wants the business to be

managed; hence, the leader enjoys greater flexibility management. However, if the business

incurs debts, the business owner becomes personally liable for the debts (Caramela 2018). The

last structure is corporation. This type of business has liabilities; benefits and certain rights with

are beyond those of an individual. An individual has little control over benefits and liabilities in

these types of businesses. Corporations might be established either for non-profit or for profit

purposes.

Types of Organizations

Organizations are divided into groups depending on their size and scope. They include

the micro, small, and medium and large enterprises, depending on their size and scope. The

microenterprises include small business organizations that operate on a very small scale because

of the low investment capital (Storey, 2016, n.d.). These organizations have nine employees or

fewer. The scope of the micro-enterprises is defined by a wide range of activities that require less

sophisticated technologies.

The small enterprises are small privately-owned businesses that are characterized by

small finances and a fewer number of employees of less than 50 employees and limited revenue

depending on the industry. The scope of the small enterprises is defined by their varying sizes

and revenue structure (Bell, Bryman and Harley, 2018; Rostamkalaei and Freel, 2016, pp. 267).

They are mostly owned by sole proprietors who work in partnership.

The medium and large enterprises, on the other hand, refer to large businesses that have a

relatively large number of employees, for instance, the medium enterprises employ a maximum
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of 250 people whereas large enterprises employ more than 250 people (Berisha and Pula, 2015;

Hillary 2017, pp. 21). The medium and large enterprises have a possibility of increasing their

growth at a faster rate. The scope of the medium and large enterprises is characterized by a huge

customer base. These enterprises have their operations in more than a country.

How Structure, Size and Scope Link to Business Objectives, Products and Services

One of the organizational objectives is to expand the business and be able to compete

effectively with other organizations offering similar products and services. This business is a

micro business because it has been operating on a small scale as a sole proprietorship. However,

I feel that for this organization to compete effectively with other businesses in the transport

sector, it has to make some changes on its structure, size and scope. For instance, I have been

considering running the business either as a partnership or as a private limited company (Hassan

2018, n.d). Looking at the two structures, I think that the limited liability structure suits this

business. This is because, as a private limited company, the organization will be able to attract

individuals who want to invest in it and raise more capital to expand the business. Also, as a

private limited company, the organization will reduce personal risk because of the limited

liability for business debts. Nonetheless, even if some members decide to leave, the business

would still continue.

However, if the business operates as a general partnership, it would not be able to achieve

its objectives. This is because, basing on the products and services offered by the business, there

would be a high risk of friction and disagreements among the members of the business

(Caramela 2018, n.d; Steiss 2019, n.d). Nonetheless, the general partnership would mean that the

every member of the partnership is liable to the mistakes committed by one of the members
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(Nigam & Mishra 2018, n.d). Also, if an individual leaves the business, the business can lose

some of its assets and this can be costly to the business. Lastly, basing on the products and

services of the company, and the fact that the organization has been operating as a sole

proprietorship, the corporate structure is not suitable because it will be costly to establish. Also,

due to double taxation, the organization is likely to enjoy little benefits in terms of revenues.

Basing on products and services delivered by the organization, it is evident that the

organization has been operating as a micro-business. However, if the organization wants to

effectively compete with other public limited companies in the transport sector, the owner of the

business should consider growing the size and scope of the organization (Harraf, Wanasika, Tate

& Talbott 2015, pp 675; Lonial & Carter 2015, pp. 102). For instance, the organization should

consider employing more people to work within the organization and ensure that the objectives

of the organization are fully met (Kasemsap 2017, pp. 45). If the owner of the business works

alone, he might not be able to achieve his objective of effectively competing with other public

limited businesses in the transport sector.

LO2

Organizational functions

The first function of an organization is marketing. This is a very important function that

helps an organization to strike and develop good interactions and relationships with its clients

and other organizations. The second function is finance (Kokemuller, 2017, n.d.). This

department helps the organization to manage its entire investment process by controlling the

company’s various expenditures and other obligations that the organization might be involved in,

such as legal obligations. It enables the organization to maintain its profits.The third is the
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human resource function (HR). This function focuses on managing the employees to ensure that

the internal work processes of the company run smoothly to improve the performance and profit

the services of the organization meet the needs and expectations of the customers (Noe,

Hollenbeck, Gerhart & Gerhart 2017). Thus it controls the entire production process. 

The three organizational functions; marketing, finance and human resources are

interrelated in various ways. The three functions enable an organization to achieve its ultimate

objective of high profitability and performance. In the organizational context, the human

resource function enables an organization increase its profitability and performance by ensuring

that highly talented and skilled employees are recruited. On the other hand, the finance function

ensures that company’s profitability is enhanced by estimating the impact of employee bonuses,

salary increments and other motivational programs on the profitability of the company. The

marketing function looks at how an organization can enhance its profitability through its image

on the market. This function looks at how an organization can attract clients and make profits

through its brand image. The three organizational functions are interrelated because they work

towards one organizational objective; enhancing the profitability of a business.

Advantages and Disadvantages of Interrelationships between Organizational Functions

and their Impacts on Organizational Structure

One advantage of interrelationships between organizational functions is that they push an

organization towards greater performance to enhance its profitability. For instance, the human

resource function will focus on hiring talented and skilled individuals to ensure that they enhance

the performance and profitability of the organization. The finance function will ensure that the
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company minimizes its expenditure on salaries and bonuses to ensure that it remains profitable.

Whereas the marketing function focuses on attracting and retaining customers for the company.

The disadvantage of these interrelationships is that they can lead to friction and

disagreements between the organizational departments. For instance, the finance department

would want the human resource department to consider the cost of hiring talented and highly

skilled employees, while the human resource department would want the finance department to

consider the benefits of hiring talented employees rather than the cost (Bundy, Vogel & Zachary

2018, pp. 477; Edvardsson & Teitsdóttir 2015, pp. 36). Such disagreements between various

organizational departments can have far-reaching consequences on organizational performance,

which can later affect the profitability.

The organization functions and their interrelationships can have a significant impact on

the coach business. As mentioned above, these interrelationships can be advantageous and

disadvantageous to the organization. These interrelationships can enhance the performance of the

coach business by increasing the profitability of the business. Also, the interrelationships

between different organizational functions can cause friction between various departments of the

organization, thus affecting its performance.

Conclusion

Organizations vary depending on their operations. Public organizations are organizations

that offer services which are meant for social purposes and may include the not-for-profit

government-owned organizations. Understanding the size, scope and structure of a business is a

critical aspect of success in the business environment. If the business structure is not profitable,

stakeholders and customers might end up pulling away from the business. Customer and
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stakeholder withdraw can have a negative impact on the organization. Therefore having the

structure enables an organization to expand its business and ensure that the business remains

profitable.
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