Unit 1 Assignment on Business Environment – Primark
Diploma in Business
Unit Number and Title
Unit 1 Business Environment
Through this report the business environment and the related concepts have been discussed. With following the case study the Deliveroo Company has been chosen for the report. The organisation structure is explained. Different types of organisational structures have been discussed which can help Deliveroo to operate in optimum level. By choosing two cities external environment has been assessed with PEST analysis. Both the cities are compared and contrasted. The competitive environment which can be faced by Deliveroo while making business are analysed with the use of Five Porter’s model. SWOT analysis has been conducted to evaluate the external and internal environment of Deliveroo.
Analyse two types of organisational structure available to Deliveroo and evaluate which of these is the most effective structure. Justify your answers with reference to management theory.
The term organisational structure referred to the activities which are associated with the business and the organisational operations such as task allocation, cooperation, coordination, supervision etc. the organisation structure has been leading the organisation to operate with proficient measures. The aim of the organisational achievement can be considered through the organisational structure. The organisational structure helps the organisation to accomplish the predefined achievement profit scale. Through using proper structure the organisation can be able to operate their business towards the profit of both the organisation and individual associated with it. There are different types of organisational structures. (Teece, 2010) Among these two main types are:
Functional structure: Functional organisational structure has been used by the organisations which tend to divide the organisational operations within small groups. The departments are divided within groups depending on the functional areas of the departments or over the geographical locations. The areas of speciality are considered while dividing the departments. Different researchers refer that the units upon which the division has been based, are disconnected from one another and also vertical in nature. There are different functional areas within the different management levels such as officer of sales management, chief operating officer. The communication within these departments are maintained for the having easy flow within the departments. Each functional groups or individuals are communicated the decision by their departmental heads. (Hazlina Ramayah, Wilson, and Kummerow, 2010)
Divisional structure: Within this structure the functions and the groups associated with each functions are divided within divisions. The divisional structure has been used the organisation which are operating their business within a wide range of geographic areas through smaller organisations. By using this structure the organisation can achieve their goals more efficiently though separately. The divisions are corresponded with the products or services and also with the geographic. This structure provides the ability to offer better products orange of different product lines. (Hazlina Ramayah, Wilson, and Kummerow, 2010)
Deliveroo can adopt functional organisational structure for optimum business. The corporate structure of Deliveroo should be based on:
- Global functional based groups: each management functions should be divided within the groups along with senior management heads. It will be helpful to establish the operations within new markets with easy processes. Major functional departments must be concerned while dividing the groups. (Teece, 2010)
- Global hierarchy: the vertical line of authority and command can be addressed. Through the global hierarchical divisions the senior management directives can be applied upon worldwide business and managerial control can be established upon entire organisation.
- Geographical divisions: the groups should be divided upon the geographical regions and the business goals. It will help the organisation to operate their business successfully within different economic systems of different countries. (Teece, 2010)
This structure will help Deliveroo to operate in international growth through implementing the managerial control over the whole business along with hierarchical approach.
Management theory is the set of the ideas which are providing the framework for the efficient management strategy to the organisation. Through implementing proper management theory within the organisational structure the organisations can be able to manage the every function within the organisation. With management theory the structure of the organisations can be established and maintained with successive approach. There are different management theories such as:
- Taylor’s Scientific management theory
- Fayol’s Administrative theory
- Weber’s Bureaucratic approach
- Human relations by Elton mayo
- McGregor’s X & Y theory (Cantwell, Dunning, and Lundan, 2010)
Deliveroo can implement the administrative theory in order to maintain proper balance within every function and departments. The human resources should be administrated within proper division of the functions. Each functional area must be administrated by the department heads. This management theory implementation will be helpful to maintain proper communication within different key functional groups and establish efficiency among different functions. (Cantwell, Dunning, and Lundan, 2010) With the administrative management approach the managers can also control the wide range of human resource of Deliveroo and lead them towards achievement of organisational goals through the coordination and organising approaches. Every functional process can be planned with this approach.
Deliveroo can manage their operations and different functions in different geographical areas through the administrative management approach. This management theory is helpful for Deliveroo managers to place directives in different areas of the business. (Cantwell, Dunning, and Lundan, 2010)
Conduct a PEST analysis on two cities of your choice. Compare and contrast both cities analysing how these PEST factors may affect Deliveroo if they chose to enter this market. Conclude by evaluating the most attractive option, providing clear justification for your selection.
PEST analysis of London (city of UK):
- Political landscape: London has been the most prosperous city within UK. The stable economic condition of the country has been providing opportunities to the industries and companies like Deliveroo to operate their business successful and with profitable measures. The government of London has been proactive. There is also political stability. The whole city has been separated within local and administrative departments.
- Economic: string economic position within the whole worldwide measure. High GDP and diverse economic condition is helpful for the growing business. Increasing foreign direct investment is also positive side of the city. The most important factor within the economy of London city is that it is consists of free market. (Cantwell, Dunning, and Lundan, 2010)
- Social factors: social factors are the most important for Deliveroo as they are delivering food products through online measures. The requirements of the citizen or the people residing in London are most important for the success of Deliveroo. The people of London have high standards of living which is a successive factor for the Deliveroo. Current migration issues are posing negative impact over the social factors. The social welfare projects of government are also posing challenges for local industry.
- Technological factor: as the London people are having higher standards of living. The city has good access to the technological measures. The residence of London city has good skills over innovation and expertise over IT. (Carroll, and Shabana, 2010) The internet subscribers and mobile subscribers are growing rapidly in size within London. This has been a positive side for doing business like e-commerce.
PEST analysis of Paris (city of France):
- Political: the government of Paris has been divided within legislative and judicial branch. There are many subdivisions within the administrations of the government. These factors can impose greater complexity for Deliveroo to do business. The governmental policies are also favourable for the business within this market as there is less restriction. (Klapper, and Love, 2010)
- Economy: as France has the five largest worldwide and second largest within Europe. The GDP of Paris is higher than the other cities in Europe, €623,189. This will provide better access to wide range of customers. Per capita income is $40.710 in France. Paris is now having better economic position and stable economic stage. (Klapper, and Love, 2010) Though unemployment rate has been increased the economic condition is stable than the other cities of Europe. Per capita income has been favourable for new market entry operations. Though setting business within Paris requires large amount of capital, it has been providing successful political environment for the business.
- Social: Paris has been a developed city within European continent. Mainly two languages are spoken there- French and Catalan. There are different religious groups with Paris. The citizens have great passion over food. The region has been famous for the French cuisine and wines. (Klapper, and Love, 2010)
- Technological: the technological and scientific environment of Paris has been developed by French government with proper skills and different innovative approaches. The increasing standards of living are supported by the innovation in the technological field. The government has been encouraging R&D operations for industrial growth. The French government’s spending in the technological improvements is also positive side for the business entry.
Comparison and contrast within London and Paris for market entry:
The organisation Deliveroo can choose Paris as their market entry for the better and successive measures of business. As the GDP of Paris is greater than London it can be considered that this place can provide better opportunities to Deliveroo. The social factors of Paris is more positive than London for doing a food business as Paris has been considerably famous for the cuisine, though Deliveroo has to offer French cuisines over others. Lower unemployment rate of Paris would be better for economic growth. The rate of population of young generation has been better than the London as a result Deliveroo can have better human resources. (Carroll, and Shabana, 2010)
Deliveroo in order to make successful market entry through the business can approach Paris or their business segment. As Deliveroo has been operating in the food services the organisation can approach their customers with better offers. Paris is also a successive option for Deliveroo as the place has been a popular destination for travellers in the purpose of leisure tourism. Deliveroo can approach different hospitality sectors of Paris.
Analyse the competitive environment within that market facing Deliveroo. Utilise the five forces of competition analysis as outlined by Michael Porter in this regard.
The competitive environment must be analysed by the organisation before setting the business. With the increased market changes like globalisation, e-commerce evolution, deregulation the completion within the business environment has been changing. By analysing the degree of competition within the business environment the organisation can plan and organise the business operations with efficiency. (Bar-Isaac, and Shapiro, 2013)
Regarding the analysis of the competitive environment Porter’s Five forces model can be used. Through this model Deliveroo can have clear understanding over the competitive power within the market. This model also defines the advantage and the strength within the situation. There are five forces which are used within the model to describe the competition within the market. These are:
- Buyer power: the impact of the buyers and their power over the industry and the success of the product are referred as the buyer’s power. The strong power of the buyers changes the position of the production within the market. The buyers have the power to change their buying decision which influences the success of the business. Within the market where there are many suppliers and one buyer the power of buyers is higher. Within such market conditions the buyers chose the price. The cost of buyer’s switching from one product to another can make changes within the business. (Bar-Isaac, and Shapiro, 2013)
- Supplier power: supply of the raw materials such as the labour, components and several other supplies are required within the business. The buyer supply relationship has been referred here. The raw materials are used for the production. Higher prices of the raw materials or unavailability of the raw materials can impact negatively on the production and later resulted in the hurdles in profit making. (Chesbrough, 2013). Strong power of the suppliers depends on the raw materials, numbers of suppliers within the single market etc.
- Threat of substitutes: the products of other industries and their availability. The availability of the substitute products can impact on the price elasticity as with the more availability of other products the demands turn into more elastic. The substitutes in greater amount can impact negatively on the business as the customers have the availability of alternatives. This is also a constraint in raising the prises. This can weakens the power of the business.
- Competitive rivalry: the number of rivals and the degree of their power are impactful over the business. The power of rivals depends on the market share and industry concentration. The products of the rivals and their process offered to the customers are the measurements of the competition or rivalry. (De Klerk, Cohen, Fukaya, Zakharchenko, Turpen, and Alagarsamy, 2013) There are different rivalry moves which can be attained by the rivals such as changing the prices or offering greater deals to the customers, improvements in the product differentiation, using the channels of distribution within successive measures, exploiting the supplier relationship etc.
- New entry threat: competition also influenced by the new market entrants and their offerings. New competitors can have better access to the market if there are few economical scales in place. New market entry can weaken the position within the market.
The market of Paris can be analysed through the Porter’s five forces. As there are different suppliers in wide range in Paris Deliveroo will not have to face the supplier’s power. The availability of the raw materials is in higher level within the market of Paris. The buyer’s power is higher as there is availability of food delivery services in the Paris in greater number. The prices of the products should be set by Deliveroo in analysing the buyer’s power. (De Klerk, Cohen, Fukaya, Zakharchenko, Turpen, and Alagarsamy, 2013) With the increasing number of e-commerce organisations like Deliveroo the threat of new entrants is large in market Paris. Through cost leadership, differentiation and focus strategy Deliveroo can have advantageous position within the market.
Conduct a SWOT analysis, outlining the key internal and external environmental factors that relate to Deliveroo.
SWOT analysis has been the using by the organisation to understand the external and internal factors which are affective for the business. Through the SWOT analysis the organisations make sustainable market niche for the business. Through the SWOT analysis Deliveroo can uncover the opportunities and eliminates the future threats. The internal factors which are affecting the business from inside the organisation can be analysed through assessing the strength and weakness of the organisation. On having knowledge about the weakness and strength of the internal factors Deliveroo can understand the advantage the organisation has over the rivals. The weakness defines the needs of improvements and the current position of the organisation. (Becker, Kugeler, and Rosemann, 2013) On having the analysis of the strength and weakness the organisation has to compare them with the rivals in order to gain the knowledge over the position in the market. The external environmental factors and their impacts over the business are analysed by assessing the opportunities and threats.
SWOT analysis related to Deliveroo:
- Superiors technological software use by the delivery service drivers and superior skills of the staffs in using the technologies are also imposing greater advantage.
- Operations within 50cities and over 20 countries are making the organisation popular among the customers.
- Eco-friendly and faster delivery system or transport is attracting the customers attention.
- Providing simple app to the customers, which are gaining support of the customers and simple steps in operation of the app is gaining the customers’ attention. (Becker, Kugeler, and Rosemann, 2013)
- Sufficient number of delivery drivers and the potential skills in giving the delivery within 32 minutes
- Business deals with the resultants are also imposing greater profits. Network with 50000 restaurants is fruitful in the business profits.
- International business strategy consists of using new funds, raising the expansion in Australia and Asia.
- Providing revenue growth to the restaurants over 20% is helpful to increase the shareholders. (Becker, Kugeler, and Rosemann, 2013)
- Quality services and quality products are also providing strength.
- Offering higher quality different food services
- Innovative marketing strategy
- Restriction to limited cuisines is impacting negatively on the customer base.
- Different foods and preferences of the customers lead to the complexity in delivery
- Restriction in the access of different geographical locations is leading to the lower brand population.
- Differences within the prices and menus in different countries are leading to the higher dissatisfaction level among the customers.
- Unavailability of resources and components of different cuisines are also making hurdles in providing quality of services and maintaining the standards. (Mithas, Tafti, and Mitchell, 2013)
- Limited growth for the competition within the search engine
- Opportunities in expanding on further more countries
- Increasing Demands of online food delivery services within Asia and USA market has been providing greater advantages
- Rapid development within the technology areas is providing greater flexibility within the operations. The technological development has been providing greater accessibility to the drivers and customers. (Mithas, Tafti, and Mitchell, 2013)With the help of the technologies the drivers are able to deliver the products in different remote areas also.
- Increasing number of internet penetration and internet subscribers as well as Smartphone usages among customers are also giving greater opportunities to Deliveroo.
- Large markets with huge customer base
- Venture in new markets
- Introduction of different items within the menu and providing different cuisines
- Management of the huge employees in different regions can increase hurdles for the administration.
- Threats of new entrants are higher in every continent (Mithas, Tafti, and Mitchell, 2013)
- Strong competitors in internal markets are imposing threats in having higher market share
- Strong competitors in the Chinese cuisine segment are also imposing threats.
The business environment includes organisational structure and other aspects. Organisational structure is important for the business to operate with successive measures. Every business has to analyse the business environment with competitive aspects. Through PEST analysis and Porter’s five model organisations can analyse the business environment and its level of competiveness. SWOT analysis is needed for analysing the internal as well as external factors which are significant in business. Different external factors cannot be controlled by the organisations. These factors can impact upon the organisational operations both positive and negative measures.
Bar-Isaac, H. and Shapiro, J., 2013. Ratings quality over the business cycle.Journal of Financial Economics, 108(1), pp.62-78.
Becker, J., Kugeler, M. and Rosemann, M. eds., 2013. Process management: a guide for the design of business processes. Springer Science & Business Media.
Cantwell, J., Dunning, J.H. and Lundan, S.M., 2010. An evolutionary approach to understanding international business activity: The co-evolution of MNEs and the institutional environment. Journal of International Business Studies, 41(4), pp.567-586.
Carroll, A.B. and Shabana, K.M., 2010. The business case for corporate social responsibility: A review of concepts, research and practice.International journal of management reviews, 12(1), pp.85-105.
Chesbrough, H., 2013. Open business models: How to thrive in the new innovation landscape. Harvard Business Press.
De Klerk, A., Cohen, M., Fukaya, S., Zakharchenko, S., Turpen, R. and Alagarsamy, T., FrontRange Solutions USA Inc., 2013. Business application development and execution environment. U.S. Patent 8,478,616.