Unit 1 External and Internal Environment Assignment – Cadbury
Diploma in Business
Unit Number and Title
Unit 1 External and Internal Environment - Cadbury
The Unit 1 External and Internal Environment Assignment Cadbury explains about the effect of external and internal environment on the HRM practices of Cadbury. Cadbury is a multinational organisation that deals with manufacturing of confectionary products like chocolates, biscuits, cakes etc. The organisation has its headquarters in Greater London and operated in more than 50 countries worldwide. The external environment includes all the factors that have their impact on the organisation from outside the organisation. The political, technological, economical and demographic factors of the country comprise the external environment for Cadbury. Internal environment of the Cadbury is formed by the internal forces in the company itself that affect the HRM functioning of Cadbury. Learners can learn about the models of SHRM in the given unit, which includes policies and HRM procedures followed by Cadbury. This unit 1 external and internal environment assignment - Cadbury discussed about the new approaches to HRM and that has been introduced in Cadbury. Further, it provides with the knowledge of the barriers Cadbury faced during the implementation of these new approaches.
1. Critically analyze the external and internal environment for the organization.
The inner and outer surroundings of the organisation form its external and internal environment. The external environment of an organization includes political, economic, technological and demographic factors while internal environment includes trade unions, organisation culture, organisation structure, productivity and objectives of organisation. All these factors affect the organisational functioning. They not only affect the business strategy but also have their impact on the HRM practices of the organisation. Let us take an example of the organisation for analysing the internal and external factors. The organisation that is studied for the purpose is Cadbury. (Santangelo and Pini, 2011). Cadbury is a multinational organisation that deals with manufacturing of confectionary products like chocolates, biscuits, cakes etc. The organisation has its headquarters in Greater London and operated in more than 50 countries worldwide. John Cadbury had established this company in 1824. Afterwards the business expanded with the help of his brother Benjamin followed by his sons George and Richard. The best selling product of the company till now is dairy milk chocolate.
External factors for Cadbury: The external factors are the factors related to the outside world that have their impact on the organisational practices. Some of the factors from the external environment of the organisation include:
- Political factors: The formations of HR policies are formed by the organisation in accordance with the legislation and regulation for HRM passed by the government of the country. With the change in the government regulations, organisations need to change their policies accordingly. The HR policies of the organisations are very much bided by the laws of the country. The government regulations have their impact on all the processes of HR from hiring, training, compensation to exiting of employee. If we consider UK government, it has changed from Labor Party to Liberal Democrat that has its impact on the operations of Cadbury. According to estimates, 3000 workers have been employed by UK factories but the entry of skilled workers can be restricted and it may affect the hiring in future. Another example could be the rising in tax rates. In 2010, the value added tax rates rose by 2.5%. This led to increase in chocolate prices and reduction of sales. That time, Cadbury Schweppes thought to reduce the operation cost by outsourcing HR and accounts practices. This results in downsizing the organisation and losses of jobs in the country. (Armstrong and Armstrong, 2011)
- Economic factors: Economy of the country affects every function of the organisation including HRM. Change in the economy affects the talent pool as well as the ability of hiring of the organisation. Wages and salary of the employees are also affected by the economy of the country. In case of recession, many companies choose to downsize their workforce. The economic downturn in UK affects the HR process of Cadbury. Cadbury decides to outsource the HR and accounts processes from other countries leading to loss of employment opportunities for the people. (Storey, Wright and Ulrich, 2009)
- Technological factors: Advancement in technology leads to up gradation of organisation functioning. For achieving the competitive lead, organisations need to upgrade themselves with the new technology in the market. The change in technology affects every function of organisation including HRM. As the introduction of new technology stimulates HR to downsize the organisation and use the technology so that the work that has been done by 2 or more people can be completed by the single employee. If we take the example of Cadbury, it believes in auditing and coaching. The assessment of the employees is done on the regular basis to dig out the need of coaching. Proper coaching is provided to the employees in Cadbury whenever there is any introduction of new technology in the organisation.
- Demographic factors: Demographic factors leads to cultural environment in workforce. It affects the HRM in one or the other way. As the organisation has expanded to different countries, it is not possible to control it from a centralised unit. Different culture and standards have been followed by different demographic states. If we talk about Cadbury, the organisation has changed its structure from centralised to decentralised units because of the acquisition that leads to splitting of business into five units. The HRM practices then made were according to the demographic culture of that particular state or country. Different standards and policies were used to run the business accordingly. (Collings and Mellahi, 2009)
Factors of internal environment: The internal environment includes factors inside the organisations. The internal environment of the organisation is formed by its culture, structure, training and development, objectives of the organisation etc. All these factors affect the functioning of HRM in the organisation.
- Change in culture: Culture of the organisation is formed by its values and beliefs. The HR practices followed in the organisation should complement the organisational culture. If there is contradiction between the culture and HR policies then the chances of arising conflicts between the organisational and personal goals will be high. If we take the example of Cadbury, change of culture was felt after acquisition of Adams and Trevor Bassett because the acquisition leads to a dilemma of culture option. Cadbury handles the situation by mixing both cultures so that the employees can understand each other better and the new culture formed was known as “working culture together”. (Truss, Mankind and Kelleher, 2012)
- Change in strategies: Change in the strategies of the organisation affect the HR policies as employees also needs to be updated about the change in organisational strategy. Organisation use different strategies at different point of time. It is the duty or responsibility of HR department to make the synergy between the organisational strategies and HR policies. Cadbury is a great example of this synergy. When Cadbury identifies that there is need to work together for better productivity then teamwork approach stepped in to the organisation. When the organisation changes its strategy to growth of employee then HR department introduced the policy of training and development for the employees. There are many such examples that suggest that change in organisational strategies leads to change in HR policies. (Mondi, Noël and Gown, 2005)
- Organisation structure: Organisation structure refers to the hierarchy in the organisation. It determines the flow of responsibilities in the organisation. The hierarchy also affects the HRM decisions. The organisation with centralised structure has different HR policies then the organisation that have decentralised organisational structure. Cadbury has a much-centralised structure before the acquisition. However, Cadbury soon identifies that the centralised structure is not working well for the organisation as the organisation is facing business problems in US. The reason behind this was that the UK management is not dealing well with the culture differentiation. This leads to splitting of the business in five units with own standard and culture.
- Organisational objectives: Organisational objectives also affect the HRM practices in the organisation. The objectives of the organisation change according to the situation. The change in objective leads to change in working pattern of the employees. We can explain it by taking example of Cadbury. The objective of Cadbury was to be competitive leader. They thought to bring employee closer to get competitive leadership. For this purpose, Cadbury starts offering its share to the employees in 1974. It acts as a motivating factor for the employees and they start focussing on giving better performance than before. (Avionic, 2013)
The internal and external factors have a very great impact on the HRM practices of the organisation.
2. Using appropriate concepts and models of Strategic Human Resource Management, critically evaluate a variety of human resource policies and procedures.
Strategic human resource management is the process of integrating the HR strategies with business strategies. It defines the plan of an organisation to attain the business goals with human resource. Strategic human resource management focuses on people as well as process. It aims is to attain the competitive advantage by maintaining and managing the skilful human resource in the organisation. It is concerned with effectiveness of performance of organisation with individual performance of the employees. SHRM focuses on effective allocation of resources and matching the resources with future requirements. (Chadwick, 2005)
- The first approach to strategic human resource management is resource-based approach. This approach believes that there should be complementary relationship between the resource and the opportunities available. It suggests that attainment of the competitive advantage could be the result of effective and efficient human resource.
- Second approach to strategic human resource is strategic fit. The strategic fit approach believes in aligning the business strategies with the HR strategies. This approach suggests that there should be integration between the two strategies so that former can support the later in the processes of attaining organisational goals and competitive advantage over others.
- Third approach is the high performance management approach that deals with the increase in productivity and quality of work with the help of human resource.
Strategic human resource management has focused on integration of the fit between the strategy of business and the HR strategy. Some models determine the strategic fit. (Go bind, 2014)
The Matching Model: The main element of the matching model is the fit between external competitive strategies with the internal HR strategy. The model defines that there should be a link between the external and internal strategies along with the association of the internal elements of the HR strategies. This model was proposed by Michigan School. This model also explains about the human resource cycle having four generic processes. The four generic processes are:
- Selection: Selection in this case is defined as matching the jobs with the human resource that is available to us. This led to efficient use of the already available resources.
- Appraisal: Appraisal refers to manage the performance of the employees. Managing the performance of the employee according to their skills helps in efficient use of the human resource. (Wright, Snell and Dyer, 2005)
- Reward system: Reward system refers to providing rewards to the employees to motivate them. Motivation is driving force to better performance. Rewards can be in the form of monetary benefits, recognition in the organisation, other health benefits etc. Introduction of reward system helps in better performance of employees that leads to generate competitive advantage.
- Development: Development of the employee is very necessary to attain the objectives of the organisation. The employee needs to be developed according to the changes in the external forces as well as the internal factors. The changes that occur in the external factors like; political changes, economic changes etc derives change in the internal policies accordingly. Hence, the employees need to upgrade themselves accordingly to match with other competitors. (Lustier and Hendon, 2013)
Harvard Model: Today, market is demanding more efficient workforce to have a competitive advantage by utilisation of human resources. This pressure leads to generation of Harvard Modal that have perspective to manage people in such way that has long-term effects. The modal generated by Harvard school is one of the most influential modal. This modal treats employees as resources and believes that human resources cannot be managed the same way as other resources in the organisation. Harvard model has below consideration regarding the policies:
- Human resource flow: Human resource flow includes recruitment, selection, placement, assessment, promotion, termination. Recruitment means attracting the candidates for the job openings in the organisation. Selection refers to selecting the appropriate employee from the applicants for that particular job. After selection comes placement, in which the employee who is selected is placed on to his designation. The proper assessment of that employee is done using different methods that leads to judgement of appraisal for that employee. The performance of employee justifies his position in the organisation. Employee with high performance pace gets the promotion and after completing his work period, the employment is terminated. (Zhen, 2014)
- Reward system: This model also focuses on introduction of reward system in the organisation. Reward system is the motivating factor for the employees to perform better. Human resource is a very important part of the organisation to attain its goals. It is very necessary to motivate them to work efficiently for the individual benefits in the form of rewards and for the organisational benefits in the form of achievement of goals.
- Employee influence: Employee influence refers to involvement employees in important processes of the organisation. Giving them more power and responsibilities creates a sense of belongingness in the employee and he work more efficiently towards the organisation. Employee influence also helps as a motivating force for the employees.
- Work systems: Work systems refer to aligning people according to the work. The employee should be aligned according to their skills. The delegation of work should be in such a way that results in efficient use of human resources. (Noe, 2006)
There are four HR policies that should be achieved by application of this model:
3. Make recommendations relating to attraction and retention of talent to support the future performance of the organisation.
Attraction refers to recruitment of the applicants. Recruitment is the process of attracting the candidates to apply for that particular job. The HR department tries to attract people by means of advertising the vacancy. They try to reach the right candidates so that they can get a pool of talent to select their employee. People attracts by the organisation not only by the means of advertising but also by the policies and the working environment of the organisation. Everyone prefers to work in the organisation that have open working environment. The policies and the working environment of the organisation also have its impact on the retention of talent. Employee always works for their personal growth. If there is no opportunity for the employee to grow in the organisation, he tries to leave that organisation. This left the organisation with high turnover and loss of talent. (Chadwick, 2005). Cadbury is working on the strategic human resource management approach. They believe in “best fit” approach for managing human resources. Cadbury focuses on enhancing the performance of the employees by adopting coaching method. Assessment of employees is done by the method of auditing so that needs of coaching can be determined. The organisation adopted a very balanced approach to attain the objectives of the organisation with the superior quality performance of the employees towards the shareholders. This approach of managing people commitment with achievement of goals proves to be a success factor for Cadbury’s development. Cadbury also believes in change management approach. At the time of acquisition, Cadbury decides to adopt a new organisational culture so that all the employees can easily mix with the culture. The commitment of organisation to its employee leads to better performance by the employees. The company moves to decentralisation from a centralised unit. This decentralisation helps the organisation to make early decisions on each level of decentralised units. (Lussier and Hendon, 2013). Below are some of the methods or approaches that can be adopted by Cadbury for future success:
- Flexi time and work: The employees should be allowed to leave and enter the organisation according to their convenience provided it will not affect their work. Number of working hours for a week or a month should be decided so that employee can complete the working hours accordingly. Flexi work refers to change in department. If an employee has completed around 4-5 years of his career as HR generalist, and want to change his department to training and development then he should be allowed to do this by undergoing a proper process. (Noe, 2006)
- Training and development: Training and development is the need of an hour. With the rapid change in the technology, the need to change the working pattern of the employee has been generated. Updating the employees with the latest technology is very important to compete with the outside world. Employees want to work with the organisation that provides them with the knowledge of latest technology. Training and development helps in retaining the employees in the organisation. (Analoui, 2007)
- Management participation in employee’s organisation: The trend has changed now. Employees rather than the management form the organisations. Organisations treat employees as the most important resource. Their retention is very necessary for the organisational success. Any decision regarding the employees cannot be made without the concern of employees themselves. Employment involvement has its impact on the performance of the employee. If employee feels that he belongs to the organisation then he will definitely perform efficiently. It retains the interest of the employee to stay in the organisation for long.
- Collective bargaining: The existence of problems in employee- employer relationship is very common. Employee always have the problems regarding wages, working hours, colleagues etc and employer always have the problems of employee co-ordination, efficient performance etc. Collective bargaining is the technique by which both the parties can sit together and share their problems to come up with the solution. The mutual discussion led to better results.
- Collaborative management: Collaborative management refers to involvement of employees in the management practices. This leads to create a sense of belongingness among the employees. The employees feel safe to work with organisation that follows collaborative management. (Collings and Mellahi, 2009)
- Individualisation: These days, employees not only work for achieving the organisational goals but also work for their personal growth. The HR department should measure the performance of the employees individually so that the employee can be praised for its individual performance rather than group performance. (Paauwe, Guest and Wright, 2013)
- Work life balance: Work life balance is the phenomenon to balance the personal and the work life. Advancement in technology makes it easier to balance the life and work. The introduction of such programs that can be conducted online leads to do work sitting at different locations. Distance cannot be barrier anymore. Webinars, online training, virtual meetings, and social apps are some of the programs that can be adopted by organisations. These programs are beneficial for the employees as well for the organisation.
Barriers to implementation of new approaches: It is very easy to generate a need of change but its implementation the organisation is very tough. Many factors act as a barrier to the implementation of these changes. The organisational culture, strategies, resistance of employees to change etc are some of the barriers that restrict the introduction of these changes or adoption of new approaches to the organisation. (Armstrong and Armstrong, 2011)
- Lack of planning: For implementing any change in the organisation, planning is very important. The lack of planning cats a barrier to bring out change. Proper planning of the process should be done to introduce the new approaches to the organisation as change in human resource management affects all the functions of the organisation.
- Unknown current situation: The management should realise the importance of analysing the current stage. The current situation and full knowledge of all the current processes running in the organisation is crucial to be studied before implementing any new approach. Change can only be implemented if the existing process is properly analysed.
- Employee resistance to change: Sometimes employees become habitual of the current working environment and organisational policies and they resist adopting any change in the organisation. The old employees are very much particular about the working patterns they are using to work within an organisation for years. It is very difficult for them to adopt a new approach. (Paauwe, Guest and Wright, 2013)
- Increase cost of training: If any new approach to HRM is introduced in the organisation, then it will lead to generating relevant training sessions for the employees. Suppose HRM has adopted a new online leave portal. Employees need to use that portal to upload a request for leave to HR. Now this has led to need of training the employees regarding the process of using that portal. Providing training to employees increase the cost of training. It also affects working of the employees as they spend their working hours in training room. (Rubery, Keizer and Grimshaw, 2016)
- Ineffective communication: Introduction of any new approach to the organisation should be properly communicated to all the levels of the organisation. Ineffective communication leads to improper understanding of the change by the employees. The top management people should keep in mind that making announcement does not mean that the employees can adapt the new approach. They need to be properly trained about using that approaches.
Every organisation has to make changes in the approaches according to the change in the external environment. Introduction of new approaches to human resource management helps in utilising the resources in better way. The above approaches align the work with the availability of the human resource. Implementation of new approaches helps in competing with the external environment. (Phillips and Gully, 2009)
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The external factors of the organisation include technological, economic, political and demographic changes that have their impact on the organisation’s HRM practices. Some of the internal forces that affect the HRM practices of the organisation are organisational structure, culture, strategies and objectives. There are different models of strategic human resource that forms the policies of HRM. Two of the major models are Matching model of SHRM and Harvard Model of SHRM. The organisation these days are very much concerned about getting a competitive advantage by the human resources available. Many new approaches have been introduced like flexi hours, collaborative management, collective bargaining etc in HRM to attain those competitive advantages over others.
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