Business Environment

Business Organisation
A business organization is an individual or group of people that collaborate to achieve certain
commercial goals. Some business organizations are formed to earn income for owners. Other
business organizations, called nonprofits, are formed for public purposes.

Organisations Types

There are different types of organisations that one encounter while passing through a mall. Ranging
from a single shop to a multinational for example If one is travelling in a mall they can easily see a
small coffee shop / caf which is a small type of company to large multinational supermarkets like
Carrefour or Tesco.

There several categories which can be easy to distinguish from the other.

1) Sole traders: A sole trader is the simplest form of business structure and is relatively easy
and inexpensive to set up. As a sole trader you will be legally responsible for all aspects of
the business. Youll generally make all the decisions about starting and running your
business and you can employ people.

Simple to set up and operate.

You retain complete control of your assets and business decisions.
Fewer reporting requirements.
Any losses incurred by your business activities may be offset against other income, such as
your investment income or wages (subject to certain conditions).
Allows you to use your individual Tax File Number (TFN) to lodge tax returns.
You are not considered an employee of your own business and therefore dont pay payroll
tax, superannuation or workers compensation on income you draw from the business.
Relatively easy to change business structure if your business grows or if you wish to wind
things up

This is mainly example to people who prefer to establish a small organisation in which
the person controls all the aspects of the business example: a small caf, a small
Fashion bags store where the owner purchase the products in wholesale or through the
manufacturing factory & sell it with small profit.

2) Partnerships: A legal form of business operation between two or more individuals who
share management and profits. The federal government recognizes several types of
partnerships. The two most common are general and limited partnerships.

Partnerships come in two varieties: general partnerships and limited partnerships. In a

general partnership, the partners manage the company and assume responsibility for the
partnership's debts and other obligations. A limited partnership has both general and limited
partners. The general partners own and operate the business and assume liability for the
 partnership, while the limited partners serve as investors only; they have no control over the
company and are not subject to the same liabilities as the general partners.

This is mainly example to company who prefer to establish an organisation in which

the businesses partner with another and control all the aspects of the business
example: A Web based business which sells merchandise online and sell through
online channel it partner with another to give the better services example Amazon
partnering with souq.com to cater the Middle east market.

3) Corporations: A corporation is a company or group of people authorized to act as a single

entity (legally a person) and recognized as such in law. Early incorporated entities were
established by charter (i.e. by an ad hoc act granted by a monarch or passed by a parliament
or legislature). Most jurisdictions now allow the creation of new corporations through
registration. Corporations come in many different types but are usually divided by the law of
the jurisdiction where they are chartered into two kinds: by whether they can issue stock or
not, or by whether they make profit or not.

A corporation is, at least in theory, owned and controlled by its members. In a joint-stock
company the members are known as shareholders and each of their shares in the
ownership, control, and profits of the corporation is determined by the portion of shares in
the company that they own. Thus a person who owns a quarter of the shares of a joint-stock
company owns a quarter of the company, is entitled to a quarter of the profit (or at least a
quarter of the profit given to shareholders as dividends) and has a quarter of the votes
capable of being cast at general meetings.

Example: Souq.com which was a largest Retailer online in Middle east the sales value
of around a Billion US$ & major part of it was bought by Amazon.com.

4) Franchises: Franchising is type of business with of the right to use a franchiser firm's
business model and brand for a prescribed period of time (with a contract annually or every
certain no. of years). For the franchisor, the franchisee agreement is an alternative to
building "chain stores" to distribute goods that avoids the investments and liability of a
chain. The franchisor's success depends on the success of the franchisees. The franchisee is
said to have a greater incentive than a direct employee because they have a direct stake in
the business.

This is example of Hardees, KFC, Pizzahut which is controlled through a big giant
company such as Americana Kuwait which controls all the restaurants in Middle East.
The Heading Company determines what products suitable for the region should be
kept in confirmation with the main company in United States.

The need for organisation is mainly to offer services/products.

The below are the possible distinctions between organisation

 Factor Example
Control Is it owned by the people, by the
people working on their behalf,
or they are indirectly by
government owned
Activity corporations.

Profit/non-profit Manufacture, Services

Legal Status Profit oriented, non-profit

oriented

Size LLC, Partnership, Sole

proprietorship, Public limited
company.

Financial sources Size of the company and

different quantity of staff, sales
revenue annually, market share,
Technological aspect no. of customers.

Borrowing, government
funding, Share issues.

How much usage of technology

in the company (example a
machine manufacturing needs
more technological aspect in
processing while water bottling
plant requires a minimal
technology.)

Environment political aspect of the operating region affects all types of business international or
national businesses. The businesses react and interact to each other and professional bodies of the
government such as solicitors and auditors. This Lead to continuous development in relation to the
changes of political and governmental laws, the business can start as a LLC and can grow into a PLC
however if the government announces to have a stake in all PLCs for 50% stake then that business
can go back to the original LLC size.

Lets take examples below of few companies that are in

different aspects in terms of Business size

Lifestyle
Lifestyle started as a single store in the emirate
of Fujairah and now grown to a size of Over 200
stores in 13 countries.
Starbucks
Starbucks started with two people who were
into education industry. They started with a
small coffee shop after retiring from the
educational Field. Today after years of changing
according to the market requirements and
adapting themselves they are serving over

Emirates Airlines
Emirates airlines started in 1985 with two leased
airplanes from PIA. Today it has grown to a size
of almost USD $ 22 Billion contribution to the
Dubai Economy. The company is constantly
growing.
million cups annually.
Macdonalds
Mcdonalds Corporation are a public organisation
which has the largest chain of restaurants for
hamburgers. The company was initially opened
in partnership by Richard and Maurice
McDonalds in 1940. The company operates in
more than 120 countries worldwide. Mostly into
Franchise option.

How size and structure of the business determines the business offering its
services/products
The difference in the activity in relation to the structure depends upon the type of service/product
offered by organisation.

1) A small coffee shop offering coffee and breakfast to morning customers

prefer itself to be a maximum of partnership where it can have a many
outlets but prefer to keep it partnership level as it is easier for them to
manage and conduct business.
2) A Multinational company such as Landmark group cannot be of a small
business but rather a PLC where one heading company owns many
companies such as Lifestyle, Splash, Shoe mart etc.
3) A Franchise such as an individual wanted to expand in the new market
however doesnt want to spend too much on developing brand image in a
country. Example MacDonalds expanding in country such as Saudi
Arabia Jordan Yemen. Already MacDonalds is a successful company
selling almost half a million burgers annually. So the requirement of
Marketing is least as the todays globalised world customers are aware of
the brands so a new international brand is already known to people
where people travel so much so often.
4) A corporation is owned and controlled by its members. PLC members
are known as shareholders and each of their shares in the ownership
control, and profits of the corporation are determined by the portion of
shares in the company that they own.
So a person who owns a quarter of the shares of a joint-stock company
owns a quarter of the company, is entitled to a quarter of the profit and
has a quarter of the votes capable of being cast at general meetings.
Example Company such as Abu-Dhabi Commercial Bank or Emaar
Property Development Company listed on Stock exchange where any
individual can buy shares and people will get share in the profit the
company makes.

Above given are the few examples given as to what determines the company to decide what kind of
structure they require to have there are few factors that affect the decision of a business owner/s.
 a) Business size: this determines how big the business is and the nature of the activity example
a Newspaper firm which specialises in printing newspapers for daily supply need to have a
good number of workforces whereas a News studio that broadcast news online or on TV
needed fewer people than that of Newspaper Company.

b) Business Activity: this Category determines what kind of activity the business is going to
have example a Retail company such as Landmark Group which has a turnover of 6.7 Billion
AED have a workforce of 50,000 People However company such as facebook that is
operating in the same region will not have that number of workforce.
c) Business Regulation: The type of regulations that is required to operate the business in the
region/country/territory. This category determines what is the rules and regulations within
the region itself the organisation want to operate into. For example if the GCC government
put a tax rate of 25% if the turnover is above 2 million annually. Whereas if the company is
operation in China and S/E asia region is paying the flat tax rate. So there is a difference in
the above when it comes to rules and regulations of the government.

The Effects of Interdepartmental relationships on business

structure
The Relationship between Organizational Functions & Organizational Structure

Your business's functions are the things it does -- production, sales, marketing, research and billing,
for example. The organizational structure defines the relationship and interactions between the
parts of your business, and identifies how the chain of command runs through the different levels.
You can set up your business structure around your organizational functions, but even if you don't,
function and structure will influence each other.

Functional Structure

Most businesses adopt a functional organizational structure: Different functions go into separate
departments that report to department managers, who then report to someone higher up. If you
adopt a functional structure, it has the advantage of clear lines of authority, and allows each
employee to concentrate on her particular mission. The drawback is that you can end up with
departments that don't talk to each other or cooperate well. A customer may get bounced from
department to department if his problem doesn't relate to one particular function.

Advantages
It keeps the Company in a proper shape and
gives every individual working within the
company a proper and clear understanding as to
what is required out of them.
This structure helps departments have their own
individual targets.
People tend to work better within the teams.
Disadvantages
Many times this type of arrangement lead to
Department not interacting with other
departments in turn leading to communities
formed within the organization. Many times one
person from a department does not have a
understanding as to who is doing what within
the organization. There is no connection within
the company and working towards a common
goal is very rarely achieved.
Divisional Structure

A divisional organizational structure spreads functions across different branches: If you have
different product lines, the division for each product line has its own marketing, R&D;, sales and
accounting departments. The advantage of this approach is that each branch has the personnel to
carry out all necessary functions. The drawback is that with employees in each division performing
identical functions, you could end up with a lot of redundancy and inefficiency.

Advantages
This is advantageous to the organization that
above medium size but progressing towards the
Big multi giant with a 100,000 Workforce.
This actually helps people to organize
individually and understand the expectations
from their work.
People working within the division has a better
chance of working within as a no. of people are
smaller and better chances of rectifying any
errors and better way of doing thing through
brain-storming etc to meet the objectives of the
division.
Disadvantages
This is mainly beneficial to certain sectors
Example Retail, Manufacturing etc.
Does not give ability for people to know the
company objective (Big picture-why the
company exist for and what are the future plans)
Monotonous working routine make people leave
the jobs as many in the world do not want to
work for years within the same level even
though if the pay is increased.
Makes it difficult to retain employees and
understand overall objective of the company if
or example is a media company

Matrix Structure

Using a matrix structure in your business can give you greater flexibility in business functions than a
more hierarchical organization. In a matrix structure, each employee works in a function-based
department, such as marketing or finance, but they can be assigned to projects under different
managers and teamed with employees who have different functions. This structure adapts
organizational function to changing organizational needs. The drawback is that the chain of
command in a matrix may become cloudy and conflicted.

Advantages
This is very beneficial as in the big giant
company there are small island companies
within that have separate agenda than their
neighbors however all working towards a
common goal.
This is advantageous as it given independence to
each department of country the small sub
division within the company work for to make
suitable decision for the betterment of the
company.
This is extreamly easy to manage system where
Disadvantages
This is mainly beneficial to certain sectors
Example Retail, Manufacturing etc.
Does not give ability for people to know the
company objective (Big picture)
Monotonous working routine make people leave
the jobs as many in the world do not want to
work for years within the same level even
though if the pay is increased.
Makes it difficult to retain employees and
all subdivisions are smaller so keeping it as a understand overall objective of the company if
family within a giant organization of huge or example is a media company.
workforce.

Organizational Charts

If you or your staff has trouble visualizing a proposed structure, you can use an organizational chart
to see it clearly. The New York and Erie Railroad developed the first organizational charts in the 19th
century as a way to improve management efficiency. A chart shows the lines of authority and control
running between different departments and levels of management. A well-designed chart will make
it easy to see who makes decisions, who reports to whom and how your organization divides up its
operating functions.

MACRO Environment & its Impact upon Business Operations

Macro environment is the condition that exists in the economy as a whole, rather than in a
particular sector or region. In general, the macro environment includes trends in gross domestic
product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro
environment is closely linked to the general business cycle as opposed to the performance of an
individual business sector.

MACRO environment affect in which the Business Operates.

The macro environment in which a company or sector operates influences its performance, and the
amount of the influence depends on how much of the company's business is dependent on the
health of the overall economy. Cyclical industries, for example, are heavily influenced by the macro
environment, while consumer staples are less influenced. The macro environment can also greatly
affect consumers directly, affecting their ability and willingness to spend. Consumers reactions to
the broad macro environment are closely monitored by businesses and economists as a gauge for an
economys health. Effects from some of the markets key factors influencing the macro environment
include the following:

Gross Domestic Product

GDP is a measure of a countrys output and production of goods and services. The Bureau of
Economic Analysis releases a quarterly report on GDP growth that provides a broad overview of the
output of goods and services across all sectors. GDP is often the lead influencing factor of corporate
profits for the economy, which is another measure of an economys comprehensive productivity.

Example the company offering Hospitality services in the state of

Kuwait where the Exchange rate with that of dollar is very Low. The
Kuwaiti dinar is way higher than that of US dollar. So the company
which is working within both countries will have smaller operations in
Kuwait but will make similar profits as compared to the outlet working
double the effort than Kuwaiti Outlet.
Inflation

Inflation is a key factor watched by economists, investors and consumers. It affects the spending
strength of the U.S. dollar and is a factor closely regulated through monetary policy by the Federal
Reserve. The target rate for annual inflation from the Federal Reserve is 2%. Inflation higher than 2%
significantly affects the purchasing power of the dollar, making each unit less valuable as inflation
rises.

Example if the business is operating and inflation increases to certain

level things can become expensive and it becomes less viable for people
to buy the products as they will have a less throw away income. This
shortage of income after all the expenses covered then they will buy less
and in turn company will have lower targets achieved.
Employment

Employment levels in the United States are measured by the Bureau of Labor Statistics, which
releases a monthly report on increases in business payrolls and the status of the unemployment
rate. As of June 3, 2016, the U.S. unemployment rate is 4.7%. The Federal Reserve also seeks to
regulate employment levels through monetary policy stimulus and credit measures that can ease
borrowing rates for businesses to help improve capital spending and business growth, also resulting
in employment growth.

Example if the business is operating and suddenly the government

approve to raise the minimum salary to certain figure which before the
law come into effect was half example from 12 US $ to 20 US $ then the
business have to reduce the no. of workforce which will increase the
workload.

The cost of keeping employees will increase tremendously and this lead
to reduction in the workforce so less people will be employed in the area
and it affects the sales of the company. There is only certain no. of
products a person can buy.

Example: A person buying in a restaurant food for takeaway for dinner.

Monetary Policy

The Federal Reserves monetary policy initiatives are a key factor influencing the macro environment
in the United States. Monetary policy measures are typically cantered around access to credit and
federal interest rate limits, one of the main levers of the Federal Reserves monetary policy tools.
The Federal Reserve sets a federal funds rate for which federal banks borrow from each other, and
this rate is used as a base rate for all credit rates in the broader market. The tightening of monetary
policy indicates rates are rising, making credit borrowing less appealing.
Example:If the Central Bank increase the rates for making credit less
appealing.

The cost of getting credit increases as a sudden increase in tightening of

monetary policy

PESTEL analysis of a business such as Nike

Nike, fully known as Nike, Inc., is a US-based transnational corporation which provides trendy,
functional sportswear across the globe. Having been founded in 1964, Nike serves to bring
inspiration and innovation to every athlete in the world. Despite being one of the largest sport
apparel and accessory companies in existence, Nike has to keep a high guard in its extremely
competitive market. In this article, well be discussing Nikes standings and potential future through
the lens of a PESTLE analysis, which looks at the Political, Economic, Social, Technological, Legal, and
Environmental factors that affect an organization.

P is for Political

Political factors are especially important to the backend of a company the part we dont
normally see. Most of todays political changes only affect how a company can produce their
goods or how much profit they make, for example. To us, this may seem insignificant, but Political
factors decide the survivability of an organization. For Nike, some of these are:

The United States, Nikes home country so to speak, has fantastic policies for growth which are
especially valuable to this corporation. These include low-interest rates and well arranged
international tax agreements.
As a company that produces and sells physical goods, Nike is, however, always subject to changes
in tax and manufacturing laws.
Various political conflicts can always make customs related processes difficult, or prevent imports
and exports.

E is for Economic

Nike sells a well-respected medium range product, so they are less vulnerable to economic
factors than others, but nevertheless here are some of the Economic variables:

A market collapse could mean bad news for Nike, along with many other big brands. Consumers
may choose to switch to lower-end, cheaper products if this were to occur, or even just as a
decent level of quality becomes easier to produce.
Nikes revenues are to some extent dependent on the low cost of labour in Far Eastern countries.
This is changing, though, which might mean higher Nike prices across the globe come with the
development in Less Economically Developed Countries.
 With its deep pocket of finances, Nike has the resources to chase after small emerging markets
in which they could sell products.

S is for Social

Public Relations has never been more relevant than today. A good social status means a lot for
modern corporations.
Worldwide increases in health consciousness means that more and more individuals are moving
towards better lifestyles. These people will undoubtedly buy plenty of sports apparel, something
which would make Nike very happy.
On the other hand, Nike receives much criticism for its dubious production processes. In fact, the
issue of Nike sweatshops is so prominent that it has warranted an entire Wikipedia article on the
topic

T is for Technological

Technology gives companies the ability to innovate in so many different ways. From interacting with
customers to designing products, technology provides value to organizations just like Nike. Here are
some of the Technological factors affecting it:

Social media allows things to blow up or whittle away faster than ever. Nike is doing well
with using social media to build their brand, but it can be a double-edged sword if used
incorrectly.

Nike also gets the opportunity to use valuable information based metrics thanks to
technological advances, allowing for them to optimize targeting and production, and
maximizes revenue.

L is for Legal

Legal factors are sometimes grouped together with Political factors in PEST analyses, but in a
PESTLE analysis which is what were doing the two are separated. There arent many legal
variables which affect Nike, but we havent forgotten about the elephant in the room:

It shouldnt surprise you to hear that, like most massive corporations, Nike also dodges
substantial amounts of tax. In recent years, there hasnt been too much of a crackdown on
this, but its still valuable to consider.

Also, Nike occasionally meets legal repercussions for its shady marketing practices, which
include false discounts.

E is for Environmental

Environmental issues are of ever-growing importance. Of course, there are only a few factors which
affect Nike with regard to this, but they are worth stating:

Nikes mass production factories are, without a doubt, harming the environment. Not only
do they release plenty of aerial pollution like most factories, but Nikes production centers
occasionally go as far as directly polluting rivers [5].
 However, Nike also shows promise of a change in their current practices, with a strong
resolve to become more eco.

Thats a wrap for this PESTLE analysis of Nike. They may have a strong brand and healthy finances,
but they need to pay careful attention to the morality of their practices and watch out for other
growing, cheaper outlets.

Internal and external analysis of organisations to identify & Conduct SWOT analysis

The internal analysis of your organization should include its culture, expertise, resources,
and unique qualities within the market place. The extent to which your organization could
adapt to changing circumstances is also a factor that needs to be considered .

Within the broad area of 'culture' you should consider the different aspects of your
organization's ethos, beliefs, public image, and structure. Regarding expertise, below points
are important.
1. How easy is this to retain or increase?
2. How many of your people play a key role or have vital skills,
3. How does this compare to your competitors?
4. To what extent does this 'expertise' help to maintain your organization's market
share?
5. Brand positioning?

Resources include: financial position, buildings, plant, machinery, and other physical
infrastructure.
Unique Qualities are those 'things' that are exclusive to your organization, such as special
contracts, customers, patents, and trade secrets. Within this area you should also consider
your research and development (R&D) capabilities.

You can then use the SWOT analysis as an interpretative filter to reduce the information to
a manageable quantity of key issues that are relevant to your organization or to the
business objective, depending on the level of the SWOT. At this stage you do not need to
elaborate on each topic; you just need to decide if it is a strength or weakness.
The External Analysis examines opportunities and threats that exist in the environment.
The following area analyses are used to look at all external factors affecting a company:

1. Customer analysis: Segments, motivations, unmet needs

2. Competitive analysis: Identify completely, put in strategic groups, evaluate
performance, image, their objectives, strategies, culture, cost structure, strengths,
weakness
3. Market analysis: Overall size, projected growth, profitability, entry barriers, cost
structure, distribution system, trends, key success factors
4. Environmental analysis: Technological, governmental, economic, cultural,
demographic, scenarios, information-need areas Goal: To identify external
opportunities, threats, trends, and strategic uncertainties.

The market section of your analysis reviews the opportunities and threats of the industry in
which you compete. Look at the overall size of the industry to get a feel for how many
companies offer similar products and services, then research the projected industry growth.

Economic Trends

Economic trends can affect your business for better or worse, so staying on top of anything
that could affect your profitability is key to conducting an ongoing external analysis.

Competitors

Keeping an eye on your competitors is a necessity if you want to gain more market share, or
even to stay competitive. Evaluate the performance of your competition by reviewing the
services and products they offer and their pricing structure.

Demographics

A careful review of the demographics of your target market is a valuable component of an

external analysis since it helps you figure out if youre on track with your marketing
messages. Review the characteristics your market shares, such as age, interests, dislikes,
location, income level and needs.

SWOT Analysis
PESTEL analysis Starbucks
PESTLE is a strategic analysis tool. It is often seen as the most effective analytical tools to analyze the
impacts of external issues. It is an extended version of PEST analysis. Other forms of this tool are
PESTEL, STEEP, and STEEPLE. The acronym PESTLE stands for 6 factors which affect the business. The
factors are:
 Political
Economic
Social
Technological
Legal
Environmental

The constant global economic recession has dented the macroeconomic environment which
Starbucks operates in. The recession has hurt the consumers purchasing power.

Recent market research reflects that consumers have not cut down on their coffee consumption.
Instead, they are shifting to options with lower prices. This means that the firm can still influence the
buying power by offering cheaper products.

Starbucks has taken steps to be a part of the mobile computing revolution. It has worked with Apple
and introduced discounted coupons via iPhone apps. They also attempt co-branding and cross
selling. Starbucks is well poised to enjoy the benefits of the Smartphone revolution.

Consumers in the US are also becoming more and more conscious of ethics. This means the brands
they buy from should abide by social and environmental norms during production. Consumer
awareness is challenging Starbucks.

These are the most obvious factors affecting the firms business. But there are many other factors
seeking attention.

I have divided and organized these issues according to the PESTLE factors. You will find the details
for how the factors impact business for Starbucks below.

Impacts of Political Factors on Starbucks

The main political factor is about sourcing the raw materials. This has gathered a lot of the attention
from politicians in the West and from the source countries. For this reason, the company wants to
adhere to social and environmental norms. It is willing to follow the sourcing strategies. It gives
importance to fair trade practices.

Another impact is the need to follow the laws and regulations in the countries from where
Starbucks buys the raw materials. Activism and increased political awareness in developing countries
have made his essential.

The regulatory pressures within the home market in the US are also a factor. Multinationals based in
the US are now subject to greater scrutiny of the business processes. The company must monitor
political stability within the country as well.

Some other factors to consider are:

Tax policy

Employment laws
Impacts of Economic Factors on Starbucks
The ongoing global economic recession is the prime external economic driver for Starbucks. As I
already mentioned, this factor dented the profitability of Starbucks. This has convinced buyers to
shift to cheaper alternatives. As they did not quit buying coffee, Starbucks should seek an
opportunity here.

The company has to deal with rising labor and operational costs. The inflationary environment and
falling profitability is causing a lot of stress.

Some other economic factors which can affect Starbucks are:

Local currency exchange rates

Local economic environment in different markets

Taxation level

Impacts of Socio-Cultural Factors on Starbucks

As already stated, Starbucks can offer cheaper products but it might have to sacrifice the quality.
This is the main socio-cultural challenge that the start-up faces. It will expand consumer base to
include the buyers from the lower and the middle-income tiers.

The green and ethical chic consumers are also concerning. They fret about social and
environmental costs of the brands. Starbucks has to be aware of this trend.

The baby boomer generation is retiring. This means spending by older consumers will decrease.
Now, Starbucks will have to tap the Gen X and the Millennials as customers.

Other socio-cultural factors to focus on are:

Changing family patterns in USA and Europe

Consumer preferences

Changing work patterns

Changes in lifestyles of population

The level of education of the population in local markets

Changing values among population

Impacts of Technological Factors on Starbucks

Starbucks is in a good position to enjoy benefits of the emerging mobile wave. Its partnership with
Apple to bring app based discount coupons is helping it ride the mobile wave easily.

The company introduced Wi-Fi capabilities in its outlets already. Internet is important to the
consumers. They can now surf the web and do work while sipping Starbucks coffee. This is an added
value to the brand. It enhances the overall consumer experience.

Starbucks is also enabling mobile payments. They are testing this in pilot locations in the US.

Some other technological factors to keep in mind are:

Emergence of innovative technology

Biotechnological developments

Developments in agriculture

Impacts of Environmental Factors on Starbucks

Many Starbucks business practices concern activists and international advocacy groups. Even the
consumers have expressed issues. So, the company should take these into account to continue
holding consumers trust.

Some of the other environmental factors Starbucks should worry about are:

Environmental rules and regulations

Environmental disasters in countries which produce coffee beans

Global warming and other environmental issues in a global level

Impacts of Legal Factors on Starbucks

Starbucks must ensure that it does not violate any laws and regulations in the home market and
countries from where they buy raw materials.

It should also stay alert about introduction of caffeine production and consumption related policies
and regulations by health authorities.

Others factors that might affect the company are:

Introduction of stricter customs and trade regulations

Licensing regulations related to the industry.

The PESTLE analysis above proves that Starbucks has a quite stable external environment. The key
reason behind this might be because it operates in the Food and Beverages industry. This means
consumers might reduce consumption partially but will not stop buying completely.

So, as recession is the most important factor, Starbucks has to lower costs and increase the value.
This way it can retain its consumer base and also gain consumer loyalty.
Strengths
Starbucks is the worlds famous coffee shop
brand. It sells the variety of coffee flavours
and develops itself with the help of R&D.
Starbucks uses a Custom Made coffee order
customer orders a coffee & it provides a
coffee within minutes, a fast service to
customers.
Starbucks is strong at research and
development, as is evidenced by its evolving
and innovative product range. Example:
entering into cold coffee market with
different varieties. They then manufacture
wherever they can produce high quality
product through contract based coffee
growers in South America and Africa.
Starbucks is a global brand. It is the most
famous brand in the world in coffee shop
business and have a very strong consumer
base where people can instantly recognise the
brand by looking at the logo of the
organisation.
Opportunities
Product development offers Starbucks many
opportunities. The brand is fiercely defended
by its owners whom truly believe that
Starbucks coffee is not just any other
Beverage brand however consumers that are
frequent coffee drinkers doesnt buy their
coffee as a major coffee drinker they are
many different reasons why people visit
Starbucks coffee. In youth culture especially,
it is a place to study and prepare and work on
their assignments/projects. This creates its
own opportunities. To add more into the
already existing product line.
There is also the opportunity to diversify the
product line catering to for example lunch
time offers, breakfast only, Ramadan (if
pertaining to Muslim Majority country
example Malaysia). Such high value combos
do tend to have a high profit.
The business could also be developing
Weaknesses
The income of the business is
still heavily dependent upon
coffee sale only in this hot
drinks market. This may leave
it vulnerable if for any reason
its market share erodes
example if people become
conscious of drinking too much
coffee.
The Beverage sector is very
price sensitive & extremely
competitive. However, most of
its income is derived
from selling coffee related
drinks. There is a huge
competition in this sector so new
brands popping up every now and
then example Tim Hortons which
is a major brand itself can counter
the sales of Starbucks coffee.
Threats
Starbucks coffee is exposed to
the international nature of
trade. It buys and sells in
different currencies and so
costs and margins are not
stable over long periods of
time. Such an exposure could
mean that the company may
be serving and/or selling at a
loss. This is an issue that faces
all global brands.
The market for beverage is
very competitive. Competitors
are developing alternative
brands to take away Starbucks
market share example Tim
Hortons coffee.
 partnerships in different part of the logistical
chain such as growing coffee by your own
company. There are also global marketing
events that can be utilised to support the
brand such as the Sports occasions.

SWOT analysis affecting the business decision making process

A SWOT (strengths, weaknesses, opportunities and threats) analysis looks at internal and
external factors that can affect your business. Internal factors are your strengths and
weaknesses. External factors are the threats and opportunities. If an issue or situation
would exist even if your business didn't (such as changes in technology or a major flood), it
is an external issue.

Strategic planning, brainstorming and decision making

A SWOT analysis is a useful tool for brainstorming and strategic planning. You'll get more
value from a SWOT analysis if you conduct it with a specific objective or question in mind.
For example, you can use a SWOT analysis to help you decide if and how you should:

Take advantage of a new business opportunity

Respond to new trends
Implement new technology
Deal with changes to your competitors' operations.

Building on strengths
A SWOT analysis will help you identify areas of your business that are performing well.
These areas are your critical success factors and they give your business its competitive
advantage.

Identifying these strengths can help you make sure you maintain them so you don't lose
your competitive advantage. Growing your business involves finding ways of using and
building on these strengths.

Minimising weaknesses
Weaknesses are the characteristics that put your business at a disadvantage to others.
Conducting a SWOT analysis can help you identify these characteristics and minimise or
improve them before they become a problem. When conducting a SWOT analysis, it is
important to be realistic about the weaknesses in your business so you can deal with them
adequately.
Seizing opportunities
A SWOT analysis can help you identify opportunities that your business could take
advantage of to make greater profits. Opportunities are created by external factors, such as
new consumer trends and changes in the market.

Conducting a SWOT analysis will help you understand the internal factors (your business's
strengths and weaknesses) that will influence your ability to take advantage of a new
opportunity. If your business doesn't have the capability to seize an opportunity but decides
to anyway, it could be damaging.

Similarly, if you have the capability to seize an opportunity and if youve missed the
opportunity, it could also be damaging.

Counteracting threats
Threats are external factors that could cause problems for your business, such as changes to
the market, a competitor's new advertising campaign, or new government policy. A SWOT
analysis can help you identify threats and ways to counteract them, depending on your
strengths and weaknesses.

Addressing individual issues

You can conduct a SWOT analysis to address individual issues, such as:

Staffing issues
Business culture and image
New product development
Organisational structure
Advertising
Financial resources
Operational efficiency.

When you're conducting an individual SWOT analysis, keep in mind that strength for one
issue might be a weakness for another. You might also identify a weakness, such as a gap in
the market that you're not covering, that could be an opportunity for your business.

Businesses using a SWOT for Business decision making

SWOT stands for strengths, weaknesses, opportunities and threats. Conducting this type of analysis
will give you a full-circle perspective of where your business stands. A SWOT analysis will provide the
tools and information necessary to establish goals and objectives for your business. Subsequent
SWOT analyses will allow you to measure your progress. The strengths and weaknesses of a business
are considered internal factors; the opportunities and threats are considered external factors.

Strength and weaknesses of the business organisation are related with macro and micro
environment factors. Management compares strength of the company with prevailing macro
environment factors like economic, political, technology, social and cultural and then formulate
strategic and operational policies. A sudden change in environmental factors affects the decisions
taken by management. Interrelationship between macro environment factors and organizations
strength and weakness are as follows:

Economic Factors: Economic factors include change in interest rate, inflation rate exchange
rate in the market. If business organization is financially viable it has sufficient financial
resources than changing in these rates will not affect the pricing and marketing strategy of
the organization. Company should always ready to face the challenges arises due to change
in economic factors.
Political and legal factors: Political and legal factors includes legal rules and regulations and
policies. Changes in these legal policies affect the company to face these legal challenges
company should have expertise and specialized staff.
Social and cultural: To face the challenge of changing social and cultural factors. A business
organization should have good staff, viable financial resources and natural resources.
Company should have strength of fulfilling consumer taste and preferences as per their
demands which are based on their beliefs and value (Jacob, W. 2013).
Technological Factors: If company have strength that it can upgrade its existing technology
with new technology than company can adopt changes in which comes in technological
factors. For this company should have good financial resources.
Environmental Factors: Every business organization use natural resources for providing
product and services. For example if company manufactures wooden furniture then it has to
follow environmental laws and do not misuse the natural resources. So management of the
company should prepare strategies for this and follow all the conducts.

Strength and weakness and macro environment factors are related with each other and affect each
other. If company fails to identify its strength and weaknesses than it cannot analyze macro
environment factors then it fails to formulate strategic plans and tactical plans. Weaknesses will
negatively affect the company if the company is not able to fulfil the consumers demand by
supplying adequate amount of product than it affects profitability of the company. So, company
should regularly make efforts in improving its weaknesses.

The End
Bibiliograpghy

http://smallbusiness.chron.com/meaning-business-organization-41925.html
https://www.entrepreneur.com/encyclopedia/partnership
https://en.wikipedia.org/wiki/Corporation
https://www.ukessays.com/essays/business/organisational-culture-and-structure-on-
business-performance-business-essay.php
http://smallbusiness.chron.com/relationship-between-organizational-functions-
organizational-structure-18571.html
http://pestleanalysis.com/pestle-analysis-of-nike/
http://smallbusiness.chron.com/external-analysis-company-71031.html
http://www.free-management-ebooks.com/faqst/swot-03.htm#ixzz4lJSCNT5V
Macro Environment http://www.investopedia.com/terms/m/macro-
environment.asp#ixzz4lIyQpRk6
http://www.marketing91.com/swot-nike/