Legal Forms and Organisational Structures

Part 1_Essay

LO 1 Organisational type, scope and size explanation

According to Fjeldstad and Snow (2018), different forms of business organisations could be defined by their types, sizes and functional scope from the perspective of their legal frames of reference. In this context, Nazarian, Atkinson and Greaves (2015) have observed that there are primarily three different types of organisations in terms of their structural compositions from the legal and ownership based perspectives. Su, Baird and Schoch (2015) have outlined the first organisation to be that of Sole Proprietorship organisation which could be alternatively defined as a sole trading company. This is primarily a legal setup which bestows the entire liability and ownership of any business organisation on a single person only. The control of the sole trading organisation is rested legally on one person and the business owner also holds the complete legal liability of profit or loss incurrence regarding the business process. According to Baregheh, Rowley and Hemsworth (2016), this outlines the fact that the business owner does not have any separate entity from the business organisation and this enhances the personal liability of the business owner to shoulder all of the responsibilities associated with the trading processes including those of finance and resource management. The profits generated are to be kept by the owner and the debts incurred have to be reimbursed by the sole proprietor. Bendell (2017) has stated that since there could be no distinction between the business entities and the legal owners, the factor of unlimited accountability becomes evident regarding having to settle losses and debts personally by the proprietors even when personal financial assets could become necessary to settle such debts. According to Roberts (2018), the initial durations of operations of SMEs involve such sole proprietorship based profit earning phases where the inceptive investments are comparatively small in amount. This makes the business overheads to be relatively minimal as well.

According to Waldman and Jensen (2016), the next format of legal organisational structure involves Partnership based enterprises where either two or more proprietors of the business organisation own the entire company and also share the incurred profits and losses. The legal ownership is constituted by the partnership deed which outlines the legal responsibilities and entitlements of the partners including the distribution of profits, obligations of investments and sharing of settling the incurred losses. According to Saebi and Foss (2015), the factor of unlimited liability also could be applied to the legal partnership based structures and this denotes the obligation of having to settle the debts of the businesses by the partners only.

However, Prajogo (2016) have indicated that unlimited liability factor can only be applied to Limited Liability Partnerships (LLPs). This format of partnership gets formulated on the basis that one or more partners could be legally exempted from the liability getting generated from the negligence of other partners. However, this legal exemption comes with the abjuration of the right of participation in the organisational decision formulation process by the exempted partners. The most common examples of LLPs are ventures undertaken by professionals such as doctors and legal firms.

According to Fleisher and Bensoussan (2015), the next legal structure of the business organisations is the Limited companies. This form of organisation entails the transferrable ownership rights since the ownership of the companies rests with particular boards of directors. The entire range of Limited companies could be subdivided into two subcategories including the Private and Public limited companies. Kotiranta, Pajarinen and Rouvinen (2016) have observed that when the limitation of liability by shares could define the natures of private limited companies which are comparatively small organisations. The shares of Private limited organisations cannot be traded publicly since these shares are not listed on the stock exchanges. The primary reason for this is the comparatively smaller number of shareholders of such businesses. According to Kohler-Koch, Kotzian and Quittkat (2017), a number of SMEs also operate within the UK under the status of private limited companies since this accords the SMEs with greater protection from liability as they could utilise their shares to raise greater funds.

On the other hand, Jaques (2017) has researched that Public Limited Companies (PLCs) are organisations which could put shares up for trading on the stock exchanges although, in the UK, a specific trading certificate issued by the Companies House would be required. The factor of minimum capital requirements is associated with the PLCs and within the UK this amounts to £ 50,000.00. There are certain differences in between the PLCs and the Private limited companies. The first one is that at least 2 directors and one secretary of the companies have to be appointed along with the filing of annual returns on a per annum basis.

From the perspective of generation of profit through regular business operations, according to Bryson (2018), organisations could be categorised into profit making and non-profit making segments. The companies which operate to earn only profit for the owners and investors, are known as Profit making business entities. On the contrary, the organisations which operate with the objective of providing services to the society in general or to any specific section of the society, are to be deemed as Non-profit organisations. The source of revenue for Profit making organisations is the sales of products and services and for Non-profit organisations, the sources are the grants and donations from various entities including the government and subscription amount from various recipients of the provided services.

For the purpose of highlighting the different aspects of an actual organisation, the study has selected the case of Associated British Foods PLC (ABF). Subramanian et al (2016) have stated that this organisation is the leading food processing and multinational retailing organisation within the UK with headquarters situated at London. It has the second largest production capability of Baker’s Yeast and Sugar globally with additional large production capability of enzymes, emulsifiers and lactose. Souza-Monteiro and Hooker (2017) have asserted that this organisation currently has 137000 employees with annual revenue of £ 15574 million and operating income of £ 1344 million. The scope of the organisation is to provide qualitative service to the international customers through various segments such as agriculture, Sugar, grocery and food ingredients.

According to Mahmoud et al (2016), the structure, extent, scope and size of any business entity are significant in terms of achievement of the objectives of the respective business organisation. Then scale of the intended organisational objectives is proportional to the overall scale of the organisational existing structure. As has been opined by Maier, Meyer and Steinbereithner (2016), in case of any business organisation possessing only limited human and material assets, it becomes infinitely more difficult for such an organisation to achieve any extensive measure of business success or market objective on the basis of such meagre resources. Hoang, Barnes and Munroe (2019) have specified that the rationale is palpable from the perspective of possession of inadequate knowledge and experience regarding the designated task roles by the human resource reservoir of such an organisation. This dearth of experience and knowledge due to the overall shortage of qualitative employees and working personnel then contributes to the problems of reaching the previously decided upon targets of sales and value achievement improvement. Furthermore, such problems also get generated from the fact that the shortage of experience knowledge and information possessed by the limited number of employees in various organisations, such as those of the start-up ventures, could also exacerbate the issues concerning the lack of proper clarity on part of the organisational workforce personnel in terms of understanding their roles and responsibilities within the working architecture of such companies.

According to Ramanathan (2017), the setting of business objectives by any business organisation is also proportional to the size of the organisation and this becomes especially significant when the organisation could be as large as ABF and thus the investment amount in various projects could be extensive as well. The most significant fact in this context could be understood that the level of profit associated with those of the business objectives of ABF could determine the difference in investments in even the foremost of business objectives such as customer service provisioning and maintenance of facilities which, are, similar to those performed by the smaller organisations.

Zietlow et al (2018) have delineated that the business objectives of companies are determined through reviewing of the scope of business that they have. This extends into the realm of local, regional, national and international responsibilities depending upon the customers which such organisations, such as the ABF, could be intending to provide services to. The service and product offerings by the companies lead to the determination of the scope and structure of the company. The necessity of having either small or vast scope to support the market propagation and sales volume increment of the products could specify the requirements of organisational size and investment in the entire process of sales generation in terms of particular services and products offered by companies such as the ABF.

LO 2 Inter-functional relationships of organisations and the associated links with organisational structures and objectives

The research of Beitzen-Heineke, Balta-Ozkan and Reefke (2017) have outlined that the role of the Associated British Foods PLC could provide to the customers ultimately determine the corresponding organisational structure. The company structures are also influenced by the functioning of the business processes and the existing market conditions as well. The ABF generally sets the business objectives to quantify the productivity capability of the company and this always requires the organisation to maintain the most effective command flexibility through development of an efficacious organisational working assembly through which the command movement could be enacted. Upholding of the uniformity of quality and organisational control is also performed through such organisational structure. The emphasis, thus, is necessary to be put on the control measures which need to be effectively utilised within the organisation and on the structural integrity while having to perform the business operations.

Finally, it is necessary for ABF to consistently clarify the roles and responsibilities of every employee regarding the task designations. This could contribute to the achievement of additional effectiveness concerning the organisational functionality optimisation in accordance with the changes in the food and retail market scenario at the UK and abroad.

According to Schnebel and Bienert (2016), the advantages of the interrelationships of organisational functions and the generated impact on the organisational structure could be outlined as the following:

1: The divergent organisational functioning of the ABF is extensively assisted by the effective inter-employee relationships.

2: Business performance effectiveness is considerably increased from the perspective of enhancement of interpersonal communication between the employees of ABF.

3: Inter-employee relationships also ensure constructive sharing of information which leads to profit level escalation due to clarification of roles and responsibilities of the employees pertaining to their task designations.

According to Ferreira and Simões (2016), the disadvantage of such a system could be perceived to be the decline in the clandestine nature of the different departmental sensitive functionalities and the open source information availability could lead to greater empowerment of perfidious employees seeking to harm others through the utilisation of such available information.

Part 2 The UK Supermarket Sector Case Study

LO3 Positive and negative influence of the Macro business environment on the business operations

P4: Negative and positive impact of macro environment identification

As per the research performed by Lancaster and Massingham (2017), the macro business environment involving the UK supermarket industry is reflective of an inherent volatility of the market conditions. The extensive range of consistent and detrimental changes in the market conditions at UK, regarding the supermarket industry, has contributed to the progressive difficulty for any business organisation to successfully comprehend the scheme of the developing conditions. Narayan and Chandra (2015) have opined that the changes within the retail industry of the UK in the previous decade have made it mandatory for different business organisations operating within this industry to comprehensively adapt to such changes. According to Aschemann-Witzel, Hooge and Normann (2016), the macroeconomic and business environmental conditions within the UK market involve societal, technological, economic and administrative influences emanating from the subsequent governments.

Furthermore, the external influences such as the government formulated regulations and rules, administrative policies and the legal stipulations concerning the business processes related to the UK supermarket industries have been of prime significance in case of the ABF as well as other industry operators. The provisioning of government assistance in the form of loans and favourable policies which could be formulated to assist in the growth and stability of the UK supermarket industry, according to Jones and Comfort (2018), could lead towards betterment of the business prospects of the Associated British Foods PLC. One significant element in terms of external influence on the supermarket industrial scenario at UK has been that of the economic element of taxation. The changes in tax rates, either in the enhancing or declining manner, could correspondingly influence negative or positive changes in the prospects of operations of different retail organisations.

From an analytical perspective, Hong, Wang and Kafouros (2015) have argued that robustness and stability in the national economy could contribute in the increment of the disposable income of consumers within the UK. This could lead to the uptick in the sales volume throughout the supermarket industry of the UK and could positively influence the sales operations of the ABF. On the contrary, the lethargic trends in the national economic scenario could contribute to in the considerable decline of the disposable income of customers and could ensure that less amount could be expended on the services and products of the retailers such as the ABF. The corresponding reaction from the retailing organisations such as the ABF could be a change in the pricing strategy to adapt to the changed situations.

M3: PESTLE Analysis

Political

The operational envelop of the Associated British Foods PLC extends throughout the world in countries such as China, UK, Spain, Portugal, the USA and others. Thus, the corresponding political scenarios determine the business discourse of the company to the maximum extent. At the UK, the successive governments have been encouraging the companies to develop job flexibility and average payment ensuring policies and to hire the human resources from local regions. This has been profoundly influencing the operations of the ABF.

Economic

According to Gao et al (2017) the development of the Value Added Tax and the increment of the rate from 17.5% to 20% by the UK governments have negatively affected the profit generation prospects of the ABF. Furthermore, the disposable income proportion available to the UK citizens, on a monthly basis, still has not registered any profound growth in spite of the additional increment of 2.7 % of the UK GDP in comparison to the previous financial year. Such factors are crucial for the business success achievement of the ABF.

Social

Schaltegger and Wagner (2017) have researched that the increasing demand of organic food has been indicative of the health conscious preferences of the UK consumers. Thus, it has become imperative for the ABF to emphasise on retaining greater organic products in the company inventory. Furthermore, the increasing numbers of pensioners and the elderly at the UK society have made it paramount for ABF to develop effective online marketing strategy since the elderly generally prefer to order the groceries and other food products online. Thus, the online catalogue of products has to be consistently updated by the ABF to attract incremental number of customers.

Technological

According to Cowling et al (2015), the factor of technology imparts an extensive array of impacts on the business operational procedures of any organisation. This has been particularly significant for the supermarket chains at the UK such as the selected organisation of ABF. The impacts of technological advancements on the supermarket and retail chains at the UK are primarily dual fold, namely positive and negative. According to Duval and Furceri (2018), the positive influences of technological advancements could be identified as the development online networks of home shopping, the expansion of retail markets through the utilisation of information technological tools such as information portals, Internet based retail service provisioning systems development and online information and fund transaction facilities. These facilities considerably cut the costs and time requirements for any retailer such as the ABF apart from increasing the sales prospects through enhancement in the point-of-sale operations. This can be further acknowledged to be the improvement of the ability of various supermarket chains and retailers such as ABF to process credit and debit card as well as cash based payments simultaneously through online payment mechanisms which have gained prominence due to information technology based advancements.

However, the negative influence of technological advancements on the supermarket operators at UK has been defined by Sodeyfi (2016) to be that of the increasing preference by the customers to select the companies which could be proficient in providing technological advancement based services. For instance, if the ABF could become less than proficient to introduce technical novelties in the online payment and order registration systems for different products, then the prospects of positive customer preference achievement for the company would decline considerably. This could translate to the loss of any competitive edge over the market rivals by the ABF. To this effect, Roberts (2018) has concluded that the expanding numbers of e-shoppers at UK have ensured that ABF has to consistently invest in the harnessing of different technical novelties such as Radio Frequency Identification and other similar tracking technologies so that remote scanners could be utilised by the staff of ABF to detect and read the RFID tags emplaced in the individual products. This could assist the company to record the necessary information such as the actual items in the stock and the accurate location of the inventory products while they could be under the process of delivery to the customers.

Legal

Grover, Chopra and Mosher (2016) have opined that an extensive range of legislative elements could directly influence the business operations of the ABF. One example has been the policy formulated by the Food Retailing Commission which pertains to the banning of certain activities in the food retailing process through stipulation of an effective code of practices.

Environmental

According to Blay-Palmer (2016), the environmental factor could be comprehended as the increasing emphasis on environmental responsibility by the society and the governments of the UK in general. This necessitates the ABF to formulate working procedures through which the reduction of organisational carbon footprint and greenhouse gasses as well as other environmentally detrimental elements could be achieved.

LO 4 Internal strength and weaknesses of business and their relationship with external macro factors

P5: Identification of strengths and weaknesses of the selected organisation through external and internal analysis

Porter’s five forces analysis of the UK food and grocery retail market

According to Tourky et al (2019), the grocery retail industry of UK is diverse from the perspective of absence of any particular criterion of importance since the extensive variety of organisational operations involve edible substances such as vegetables and cereals, soaps, dwelling furnishings as well as different accessories. The professional responsibilities are also varied in terms of provisioning daily usage commodities, marketing, financial transactions, planning and control mechanism utilisation.

Bargaining power of suppliers

Jenkins and Williamson (2015) have outlined that suppliers have extensive bargaining ability in regulating the grocery and food retail industry. For ABF, suppliers execute the most significant role of maintaining the supply chain. The bargaining power of suppliers is wielded through the demanding of imbursement of dictated payments from the retailers such as the ABF in return of the supplied goods. However, large organisations such as ASDA could overcome such pressures through diversification of the sources of their raw material supplies.

Bargaining power of buyers

Lacoste and Blois (2015) have stated that customers have the most extensive ability to influence the business process of the food and grocery retail industry of UK. The underlying aspects have been price sensitivity during inflation or financial downturns, the influence of online shopping in the measure of finding the low prices through comparison between various retail sources and the effects of standardisation and brand value. The switching cost measure is also significant since low costs of switching could enable the customers to switch from one product to the other instantaneously.

Threat of new entrants

According to Bonanno, Russo and Menapace (2018), the UK retail market has been one of the most contentious market spaces in the UK. The indications have been contention relating to representation of different enterprises, intense rivalry, conflict of prices and plan alterations. The necessary investment ventures are also substantial from financial perspectives. Thus, the threat of new organisations emerging in this sector is comparatively less than other industries.

Threat of substitutes

Mateut and Chevapatrakul (2018) have stated that the ranges of grocery and food products offered by the retail organisations at the UK are substantially large and identical as well. This observation applies in case of the ABF as well. Thus, switching from one to another brand of products by the customers is relatively effortless and this entails the high threat from product substitutes.

Rivalry among competitors

The competitive rivalry is intense amongst different retail supermarket operators within the grocery and food retail markets of UK. The rival enterprises generally compete within the realm of qualitative standardisation, improvement of delivery mechanisms, online marketing and advertisement enhancement and demand stimulation strategy formulation.

P6: Interrelationship of external macro factors and organisational strength and weaknesses

Farooq, Rupp and Farooq (2017) have observed that organisational weaknesses and strengths primarily influence the immediate business conditions of the associated company such as that of the ABF and this translates into the changes by the company at the tactical operational levels. However, macro factors have extensive influence on the entirety of the geographical extent of the company and involve changes in the organisational ability to manage the business discourse from the perspective of decision formulation, marketing, working process management and performance modulation of human resources. Thus, the macro environmental aspects can influence the strategic level operations of the ABF. Therefore, it is necessary for the ABF to ensure that the formulated business strategy could reflect effective utilisation of the organisational strength and conceal the organisational weaknesses at both the home markets and at abroad as well.

M4: SWOT Analysis of Associated British Foods PLC

Strength

1: Strong brand identity

2: Enduring customer loyalty

3: Extensive assortment of operational undertakings

4: Considerable geographic market diversification

5: Ability to silhouette the organisational culture with positive vision of growth.

Weaknesses

1: Possession of only limited liquidity at any point of time.

2: Overt emphasis on the bakeries and edibles could affect the growth prospects of other products endorsed by the company.

3: Problems in institution of proper organisational culture and uniform conduct ethics regarding the diverse employees emanating from different geographical regions.

Opportunities

1: Opportunity to invest in the sales of bio-fuel for the future consumption.

2: Expansion opportunities into new market horizons.

3: Expansion of brand identity through utilisation of merger and acquisition tactics.

Threats

1: Intense competition.

2: Consistent volatility in consumer preferences.

3: Absence of growth in the disposable income scenario of UK consumers.

4: Relatively slow recovery rate of the international market from the previous global crisis.

D2: Macro and micro factor based influence on business objectives and decision-making:

Epstein (2018) have propounded that internal factor based micro business level analysis could determine that ABF possess the strength of stability in terms of strategic positioning and customer loyalty management ability and these factors could enable the organisation to formulate effective domestic market operational strategies to capitalise on such strengths. Apart from these, other positive factors favouring the effective business operations of the ABF are loyalty of employees in terms of negligible employee turnover and the extensive overseas reach in terms of the international markets.

On the other hand, as per Sahebjamnia, Torabi and Mansouri (2015), the macro level factor analysis could outline that the product differentiation strategy employment by the ABF is of prime importance since five different product segments have been endorsed by the company has had been demonstrated in the company profile section. This has to determine the price formulation strategy of the organisation to retain the customer attention to the most optimised extent.

However, the elements of market rivalry with other established retailers both at UK and abroad as well as the debilitating effects of the previous economic recession have been prime macro level influences which have hampered the ability of ABF to achieve the most ambitious market objectives in terms of expansion into new market domains and generation of maximised profit from the existing ones. Furthermore, the macro level aspects of differential taxation rates at different geographic market segments globally and diverging customer preferences in terms of product prices have been adversely influencing the operational ability of ABF. Thus, the company has to formulate an effective pricing and marketing strategy through which the both the categories of customers, those who are willing to pay high prices for qualitative products and those who desire qualitative products at low costs, could be served. Furthermore, the micro level aspect of web based marketing ability development could as well play a significant role in determining the business decision formulation discourse at the company under consideration so as to better attract the e-shopping community of customers.

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