Business

and
Business Environment

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Contents
Introduction......................................................................................................................................1
Section 1..........................................................................................................................................2
Explaining three different types of organisations........................................................................2
Basic three types of organisations...........................................................................................2
Explaining size and scopes of different organisations.............................................................3
Determining the structure of Virgin Atlantic...............................................................................5
Section 2..........................................................................................................................................8
Applying PESTEL Analysis on Virgin Atlantic..........................................................................8
SWOT analysis..........................................................................................................................10
External macro and micro factors’ effect on strength and weakness of a company..................12
Conclusion.................................................................................................................................13
References..................................................................................................................................14

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Introduction
A business has to run its operations in different situations and environments. These environments
have a great impact on any business organisation. The report is focused on internal and external
environment of a business. How a business can identify their internal and external factors which
can have impact on their business operation and revenue as well. Types of organisations and
their advantages and disadvantages are discussed also in the report. Environmental issues have
both positive and negative impacts on a business. It’s important for a business to tackle them
carefully in order to run their operations smoothly. The organisation which has a good
knowledge about these factors and also has good control over them can perform best in the long
run. Recently I joined Virgin Atlantic, a renowned UK based airlines company as a manager.
The report is made the order of CEO of the company. Their SWOT and PESTEL analysis have
also been described in the report. How they can deal with their opportunity and threat are also
discussed in brief. Applying the result of these analysis in an effective way a company can get
fruitful result in the long run.

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Section 1

Explaining three different types of organisations

Basic three types of organisations

A business organisation is a group of people bearing same ideology who work to achieve a
certain goal either to make profit or do something good for people. Organisations can be of
different types like Sole proprietorship, Partnership, Private corporation, Public corporation or
Voluntary organisation.

Private limited company: A small business organisation held privately by a group of owners is
called private limited company (Scheyvens, R., Banks, G. and Hughes, E., 2016). Virgin Atlantic
is one of the largest private companies of the UK which is a subsidiary business of Virgin Group
owned and founded by Sir Richard Branson. The company operates flights in North America,
Caribbean, Middle East and Asia. The company was established in 1984 making Heathrow
airport as its base hub. Now the company has 35 fleets in total.

Mission of the company is “To grow a profitable airline, that people love to fly and where people
love to work.”

Public limited company: A business which has legal right to offer its share to public is known

as a public limited company (Public Limited Company: Definition, Features, Advantages,

Disadvantages, 2021). Aston Martin Lagonda Global Holdings plc is an example of public
limited company of the UK. Lionel Martin and Robert Bamford started the journey of the
company in 1913. The company produces luxury super cars and GT cars. The company has
about 2450 employees. From the very beginning they started producing high speed motor cars
for racing and touring.

Mission of Aston Martin Lagonda is “To simply be the best in every area of our business.”

Voluntary sector: Voluntary organisations are those whose primary goal is to make social
development rather than making profit. This sector is often called non-profit sector. The British

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Red Cross Society is a British humanitarian network across the world. The organisation is a
registered charity and formed in 1870 with a primary goal to provide help people who are in
crisis both in the UK and outside the UK around the world. Now the organisation has 17200
volunteers and 3400 staffs.

Mobilising the power of humanity is the primary target of British Red Cross Society.

Explaining size and scopes of different organisations

Business organisations are basically of three types according to size-

1. Small organisation;
2. Medium organisation;
3. Large organisation.

Small organisation: According to Companies House a company having less than 50 employees
and a turnover under €10 million euro. Cafepod is one of the most successful small business
organisations in the UK. Cafepod Coffee Co. is an independent craft coffee business founded by
Peter Grainger and Brent Hadfield back in 2011 in London. They produce quality coffee beans
which are praised in the UK and other markets where Cafepod’s products are available. Motive
behind establishing the business is to produce better quality and better test coffee breads. The
company has less than 50 employees which is 15 or around it and their turnover is less than €10
million euro.

Vision of the company is “To make good and strong coffee.”

Mission of the company is “Bring high quality espresso home.”

Medium organisation: According to Companies House a medium company is that company

which has turnover around €250 million euro and less than 250 employees. John Good Shipping
is medium business organisation of the UK which is a logistics service. The company was
founded by John Good in 1883. Good shipping was very rare in that time for which the company
was basically founded. The company has now around 250 employees.

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“To make the process of buying and managing shipping and logistics services simple, efficient,
stress free and cost effective,” is the primary goal of John Good Shipping’s service.

Large organisation: According to British Company Act 2006, large company is that company
which fulfills at least two of these three criteria-

1. The companies having turnover more than 32 million GBP;

2. Having a total of more than 16 million GBP balance sheet;
3. More than 250 employees.

Arcadia Group is a renowned British retail company established in 2002 in London. The
company has 13000 employees and according to Forbes Arcadia’s net worth in 2020 was about
€1.2 billion euro which indicate that Arcadia Group is a large business organisation.

“Avail the necessary product or part at the right time, within a short distance for electronic
devices,” is Arcadia Group’s moto.

According to primary goal of earning profit, business organisations are of two types-

For-profit organisation: Organisations whose primary purpose is to make profit selling their
products or service to the market is known as for-profit organisation (Tang, K.N., 2019). General
type of business organisations is for-profit organisation. In most cases these businesses are
owned by public or private sectors rather than government. However, this doesn’t mean that
government has no control over those businesses. All for-profit organisations have to follow
government rules and policies to run their business. For-profit organisations can be small and
medium enterprise (SME) or large enterprise, private or public, totally depending on the owners,
what they exactly expect from their business. The size of organisations depend on capital size,

number of owners, tradability of its shares (Terziev and Bonev, 2018).

Each of these organisations run their business in order to make profit and they have different
scopes as per their products or services. They generate revenue to maximize their business and
distribute handsome profit among their investors.

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Non-profit organisation: Organisation which are built up not for making money but for

improving different sectors of society is called non-profit organisation (Rathi, Given and Forcier,
2017). Almost every feature of non-profit and for-profit organisations are same except primary
goal which is not to make profit of any non-profit organisation. They work for social welfare and
also follow business rules and accept challenges like for-profit organisations.

Determining the structure of Virgin Atlantic

Virgin Atlantic is a British airlines company founded in 1984 by the founder of Virgin group, Sir
Richard Branson. Virgin Airlines is a subsidiary business of Virgin group which helped the
group grow faster. Main base of the airlines is in Heathrow and secondary is Manchester and
operates flight to North America, Caribbean, Middle East and Asia from there. As Virgin
Atlantic is a company having around 5000 employees and they have private ownership, the
company is a large private company.

Mission and vision of Virgin Atlantic is “To grow a profitable airline, that people love to fly and
where people love to work.”

Figure-1: Organisational chart of Virgin Atlantic (ResearchGate., 2019)

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Types of business functions and their interrelation
Different business organisations have different goal and there are some functions to attain their
objectives which are almost same in each type of organisations. These functions are interrelated
to each other in term of actions. They are discussed below-

Finance and production: Objective of an organisation’s finance function is to acquire and

utilize funds for necessary operations of the organisation. Making financial plan, raising capital,
assigning budget for different operations are responsibilities of finance function (Pretorius, P.,
2020). Production function focuses on the service or the product of any company. As Virgin
Atlantic is an airlines service, they produce service for their customers. If finance department and
production department are not inter-connected, it would be a mess. Production department can’t
do anything without necessary funding which is done by finance department or function.

Marketing and sales: Promotion is important for any organisation to grow and survive in the
competitive market. Marketing functions is subjected to promote products or service of an
organisation, make people know about their product and bring potential customers to the
organisation (Sozuer et al., 2020). Without proper marketing strategy a company can’t sell their
service or product to the consumers. In case of Virgin Atlantic, if they wouldn’t have such
brilliant marketing strategy, they wouldn’t survive in the competitive market.

Human Resource and other functions: Human resource is one of the most important
department of an organisation which is responsible for finding, recruiting and training employees
about the culture and the operational system of the organisation. If human resource department is
not strong enough, a company can face problem in each of its departments. For example, if HR
of Virgin Atlantic is not aware of recruiting new ground crews, flights can make delay in short of
ground crews. Also, other departments can face lack of employees or lack of proper training.

Impact of organisation size and scope on the interrelation of business functions

All the business functions are connected with each other. It’s not like that finance function has
no relation with HR function or accounting has no relation with marketing. Human resource is
responsible for recruiting new employee and train them accordingly and these employees need
proper knowledge about the company introducing which is also HRM’s responsibility. Creating

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a good image about the company is very important for making a customer base and it can be
done by proper marketing strategies. Money is called the lifeblood of any business organisation
and a proper use of money decides how much the company will achieve its goal and it is under
finance function. Interrelation of business functions also depends on size and scope of a
company. If a company is small or medium, it’s comparatively easy for them to maintain
business function interrelation than to large organisations.

Advantages and disadvantages of business functions

Business functions are interrelated and work together to achieve the ultimate goal of any
organisation. Though they are important for any organisation to achieve goal, they have
advantages and disadvantages too.

Advantages Disadvantages
 Each department focuses on their specific  Complexity in running those
area of work which helps them to be departments.
expert in their sector.  Sometimes employees get dual command
 This skill helps employees to become which puzzles them.
more productive.  A manager thinks only about his sector
 There is different management for each which creates a boundary in his thinking
department. process.
 Employees understand their role in  Lack of coordination results in delay in
organisation clearly. decision making.

Section 2

Applying PESTEL Analysis on Virgin Atlantic

PESTEL is a business analytical tool which analyse Political, Economic, Sociological,
Technological, Legal and Environmental factors, the key external factors influencing an

organisation (Academy, 2021).

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 Figure-2: PESTEL analysis (Pinterest., 2020)

PESTEL analysis helps an organisation to know its external environment and understand how
they influence the organisation. Acquiring this knowledge organisation can take actions as per

the impacts of those factors (Team, 2021).

 Political: Brexit decision became a huge threat for Virgin Atlantic in 2016 as there raised
a hostile situation which affected their flights in other countries of EU. Britain has not
fixed their new trade policy to do business with EU and the rest of the world. It has
created a vague situation for Virgin Atlantic and other business organisations of the UK
as well. Government of UK has approved Virgin Atlantic to introduce a new runway at
Heathrow airport which has helped them to create new roots.
 Economical: Along with other rich countries like America, Germany, Japan, UK is also
one of the richest countries of the world. But UK faced some major economic drawbacks
in later 80’s and 90’s which made the country’s economy weaker. Airlines business faced
a huge problem in that time. Low fuel cost and interest rates helped Virgin Atlantic to

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 grow their business faster. Due to COVID-19 their USA business has become
bankrupted.
 Social: One of Virgin Atlantic’s key advantages is their dedication to customer service,
therefore the ability to connect with their target market adjust to the external social and
cultural factors is critical. The company maintains their social responsibilities and
customer value. A large-scale ATC strike is a threat to the company.
 Technological: High rates of technological innovations and inventions helps a business
to improve their services and increase the profit margin. Virgin Atlantic faced some
major problems with latest technologies. They faced problems in online ticket booking,
online customer care service, e-commerce sector. They also use latest technologies in
their flights which have make the airlines the most famous airlines of the UK often which
is called better than the British Airways.
 Environmental: Environmental issues have become very sensitive in present time.
People praise those business organisations which try their best to not to harm the
environment. Virgin Atlantic focuses on less CO2 emission. People take it positively and
so Virgin Atlantic is becoming way more famous day by day. Weather in UK remains
very bad during winter season. Almost everything gets stuck in heavy snow. In this
adverse weather Virgin Atlantic can’t operate their flights.
 Legal: Virgin Atlantic faced a great critical situation in December 2016 when their pilot
decided to make a strike against the Professional Pilot’s Union or PPU. About 900 pilots
of the company joined the action demanding to be the exclusively recognised only for the
Virgin Atlantic.

Ways these factors affect decision making process

Factors of PESTEL analysis have impact on decision making process of any company. Virgin
Atlantic’s macro factors can affect their internal decision. Whether they can start business in a
new country depends on the political situation of the country. Also, the country’s economic
condition will have an effect on the decision. If the country is politically unstable, Virgin
Atlantic’s decision to start business there will be a loss. Lifestyle of that country’s people also
will affect their decisions.

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SWOT analysis
SWOT is an analysis tool of business organisations which stands for Strength, Weakness,
Opportunity and Threat. This tool analyses both internal and external environment of an
organisation (Hajizadeh, Y., 2019).

Strength and weakness are part of internal environment, which means things over which a
company has control and can change if needed. Location of company, team members,
intellectual property are examples of this environment (Pretorius, P., 2020).

Opportunity and threat, on the contrary, are part of external environment which are going on
outside the company in competitive market. Company has no control over these two, at the most
company can take advantage of opportunities and take necessary steps against threats but can’t
totally change them (Tang, K.N., 2019).

Figure-3: SWOT analysis (Wordstream., 2018)

To identify Virgin Atlantic’s strength and weakness a SWOT analysis is must. An analysis has
been conducted which is given below.

Strength: The term strength implies which third parties actually see as company’s strength, what
is unique of the company’s product or service. Virgin Atlantic needs to figure out their strengths.
The company has got a very strong foundation which has more subsidiary business and a strong
economic root. They have satisfied customer base and very good airline service which is
sometimes said better than the flag bearer airlines of the UK. They are larger than most other
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airlines of the UK. Excellent advertising and innovative branding are another strong side of the
company.

Weakness: Factors which are responsible for the company’s loss or lose of goodwill are
basically weakness for the company. A company must identify these factors and try to solve
them otherwise it will impact company’s revenue and profit badly. There is a severe competition
in airlines service in the UK which results in slow growth rate of Virgin Atlantic’s stock price in
the market. The company has a limited presence in emerging economics which leads them to
slow growth.

Opportunity: Though a company has no control over opportunities outside the company, it can
utilise the opportunities for a better result and good growth rate. Virgin Atlantic’s one of major
bases is Heathrow which is a very important connecting point of the world and it is a great
opportunity for the company. The company has opportunity to grow its business in another
countries of the world as it has a strong foundation. Attractive branding skills of Richard
Branson is another big opportunity for the company.

Threat: Rising fuel cost and everchanging aviation rules are big threat for any airlines company
and Virgin Atlantic is not outside the loop. Labour cost is increasing day by day which can affect
the company’s margin. European market has a competitive environment which is also a threat for
Virgin Atlantic. Recently in COVID-19 pandemic the company has faced a huge loss due to
lockdown situation and customer’s changing mind not to waste too much money n critical
situation. The company is asking a 500-million-euro bailout from the UK government to prevent
bankruptcy.

Ways these factors affect decision making process

A company must know what are its strengths or what are its major weaknesses. If a company is
aware of their strong sides, they can make effective decisions. As explained above, Virgin
Atlantic has a strong foundation of Virgin Group, it can help them making new decisions like
whether they will add to their new fleet or not. Threats like increasing labour cost can affect their
decision to recruit new ground crews.

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External macro and micro factors’ effect on strength and weakness of a company
Some macro environmental factors which can affect a company are-

 Economic factors
 Demographic forces
 Technological factors

Interest rate, exchange rate, inflation, tax rate, demand and supply are major economic factors.
Among these exchange rate, inflation can affect Virgin Atlantic to a great extent. Beside these,
technological factors and demographic factors have impact on Virgin Atlantic as well. For
example, technologies they use for booking ticket or how they treat their customers on board,
which facilities they get while flying, whether they find the flight relaxing or not, do they feel
secured in their flight or not, is their internet connectivity good enough are major technological
issues.

External macro factors of a company are stated above which can affect a company in different

ways (Micro-environment, 2021). The macro environment is basically the economy itself. Some
of major macro environments are-

 Customers
 Suppliers
 Competitors
 General public

Customers are the main key factors to run a business. The kind of customer base that Virgin
Atlantic attracts, as well as the reasoning behind purchasing their service, are going to highly
affect the way they create marketing campaigns. They can affect both positively and negatively
Virgin Atlantic. Virgin Atlantic should always try to satisfy their customer to the extreme to get
a good and regular customer base. Being an airlines company Virgin Atlantic has less affect of
suppliers in their business. However, their food suppliers, fuel suppliers have a great impact on
their success. If they don’t get proper response from suppliers, Virgin Atlantic can face critical
situations to be handled. Another most important external factor is competitor and European
market is too much competitive (Tang, K.N., 2019). Competitors are challenges for any company

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to accept them normally and win them doing better than them. British Airways, Ryanair,
Volotea, Qatar Airways are some of main competitors of the company. If anyhow Virgin
Atlantic fails to serve their passengers better than its competitors, it will be harmful for their
revenue and margin as well as goodwill losing which will affect their business in the long run.
General people are likely to judge the business and so they should be prioritized before taking
any steps.

Conclusion
Business environment not an easy term at all. It should be handled very consciously and
smoothly rather it will impose a negative impact on a business. Thus, an organisation should first
find out their business type and size then they should figure out their micro and macro
environment which have been discussed in this report. These micro environment factors are the
visible and most important for any business and is are in control of a business on the contrary,
macro environment factors are actually non visible and organisation has less control over them.
SWOT and PESTEL analysis are very effective in order to figure out micro and macro
environment of a company. A thorough analysis can lead a company to a better future.

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