Business Analysis of Sole Traders
|✓ Paper Type: Free Assignment||✓ Study Level: University / Undergraduate|
|✓ Wordcount: 11090 words||✓ Published: 2nd Sep 2021|
Unit 1: Business and the Business Environment
This assignment will look at the business and the business environment that an organisation operates in, there will be a close look at the different type of organisations in the market from public, private and non-profit organizations. The benefits and scope of each organisation and the factors that exist for the growth of a business, the influences that sharp a business from the market structure, type of economy, globalisation factors and government policies. From the aspects that are related to the business environment, and how these aspects play a crucial role in the success or failure of a business. There will also be a look at why analysing and monitoring the business environment has been very crucial for achieving the objectives of the organisations and why it can influence the business operations both positively and negatively through the uses of the macro environmental factors i.e. the PESTLE and SWOT model. These models will help to understand the impact that these factors play on the business relations and how an organisation adapts itself in a business environment to define its success.
LO1. Explain the different types, size and scope of organisation
It is estimated that around 80 per cent of businesses in the UK are sole traders, this business is normally owned by one individual who is self-employed and who may have employed other people on either a full/part time basis. Majority of sole trading businesses have been mostly set up by using personal funds, this allows the individual to have a bigger share in the business.
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The advantage of being a sole trader is that you can decide on what type of goods or services they will produce and where the business will be located. Other advantages can be the capital that is required, what staff (if any) is employed, what the target market should be. Where the business is a success, the profits that accumulate from that success will either go to the owner or be reinvested into the business to maybe clean past borrowing. Should loss occur, these too are the responsibility of the sole trader who has obtained unlimited personal liability.
- An important concept – adds risks faced by the sole trader.
- Business owner’s responsible for all debts of the business.
- May have to sell own possessions to pay creditors.
Key legal points
Formalities that are needed to set up as a sole trader: the registration of the business with company house, checking that the business name is not already used by another organisation, registering with inland revenue – to see that the company is VAT registered if a turnover exceeds above £67,000 and to fulfil specific requirements laid down by the local authority.
Once this business is set up, there will be variety of legal requirements that must be followed. This can cover many factors but one being the protection of customers, other factors are:
- contract law, consumer law, employment law.
- Business accounts and records
- Inland revenue and if necessary VAT accounts
Key Points – Sole traders forming a partnership
Some sole traders can look towards creating a partnership to start or continue their business, this could be down to many factors such as a lack of funds for expansion, poor marketing, lack of research of the marketplace and insufficient management skills.
Advantage and Disadvantage of a Sole Trading company
A partnership is a business that is made up of two or more owners who seek to carry on a business or have establish a business of they own already, the partners will finance and run this business jointly. Such businesses can vary from a partnership between a husband and wife, to large firms of accountants or solicitors.
Setting up a partnership has its own legal procedure, like the owner being able to apply for limited personal liability both jointly and severally – this insures the business for any debts or bankruptcy which occurs during the time of the partnership. One disadvantage to this liability is that a partner is liable in full for the whole debt and can in turn be sued or their assets seized until the debt is satisfied.
Key Legal Points
Most partnerships are limited to 20 or less partners, under the law most business particularly in the professions, may have a dispensation from this rule (The 1985 Companies Act –states that any business with more than 20 partners must be registered as a company).
A written agreement, which is not always necessary but tends to be formally enacted in a “Deed of Partnership or Articles”, helps to reduce hesitation, to establish intentions, the status and the contribution of each individual partner is known.
When there isn’t a written agreement, the “Partnership act of 1890” lays down the codes which establishes the relationship between partners – “it states that all partners will share equally the capital and profits of the business and to contribute equally towards its losses”.
Unlike Sole Traders
When management responsibilities transfer to a single individual, partnerships will permit the sharing of responsibilities and tasks. It is common for a partnership to see individuals specialise to some degree parts of the business. The idea of more than one person involved in the ownership of the business will natural increase the amount of finance that is available to the business. – This will allow for expansion/growth within the business without the owners losing control of the enterprise.
The sharing of decision and responsibilities may represent problems within the business, particularly when partners are unable to agree over the directions that should be taken for the business or the amount to be reinvested in the business.
Advantage and Disadvantage of a Partnership
The second most common set up business in the UK is a limited company, it has been described that a limited company has its own legal identity and not the identity of its owners. Whereas sole trader or a partnership will own the property or assets within the business, a limited company can grow to become separate from the people who own it.
Setting up a limited company
A Limited company is a business organisation consisting of two or more individuals who have agreed to embark on a business venture. Individuals seeking to form a limited company are required to file numerous documents, with “Company House”. If satisfied, the register will issue a certificate of Incorporation, bringing the company into existence as a legal entity. Alternatively, a participant could buy a ready-formed company by approaching a company registration agent who specialises in company formations.
Differences between a private and public limited company
The UK law maintains a difference between public and private companies because public corporations in the UK are state-owned companies. For those that wish to be a PLC ran business must first satisfy to have the following:
- A minimum of two shareholders, at least two directors
- Shares in a plc can be traded on Stock Exchange and can be bought by members of the public.
- Shares in a private limited company are not available to the public.
- Issued share capital (initial value of shares put on sale) must be greater than £50,000 in a plc
- A private limited company many have a smaller (or larger) capital
A company which meets these conditions must always show the title “public limited company” or “PLC” in its names, they are also required to make full accounts available to the public. Any company that chooses not to meet these conditions are therefore seen as a “private limited company”.
Reasons for a private limited company to become a “plc”
Public companies, which start off as a private limited company, may have many thousand, even millions of owners (shareholders) which sees the organisation operate on a national or international scale. Unlike public limited companies, private limited company must have a minimum of two shareholders, but its shares cannot be offered to the public. The restriction on the scale of shares or the ability to raise considerable sums of money normally ensures that most private companies are either small or medium sized – family operating businesses.
Public companies might be outnumbered by private companies, but they have a more major impact on their industries by their capital and assets.
Importance of limited liability
In the case of a limited business going through bankruptcy, there is a limitation on the individual’s liability to the amount that they have invested in the business, this would include the amount that is remaining unpaid on the shares. They can, from time to time, be an exception where an owner has given a personal guarantee to cover any loans they have obtained from a bank or any other institution (which can be a requirement for many small, private limited companies) but they cannot claim personal assets of shareholders to recover amounts owed by the company
Separate ownership and management of a company
At the forefront of any business is an appointed director, this individual is chosen by the shareholders of the company as they may not have time or management skills to run a company and see it best that they entrusted the day to day running of the business to an individual who is skilled and experienced.
|Director||managing the affairs of the company, making important decisions concerning the direction of the business. Shareholders do not normally have the right to intervene in the day to day management of the company. If at any point this individual does exceed his or her authority or fails to indicate clearly that they are acting as an agent for the company, they become personally liable for any contracts they make.|
|Chairperson||Is elected by the other members of the board, picked for their knowledge and experience of the business. They become the face of the company, establishing and maintain a good public image and hence many large companies like to appoint well-known public figures for this role.|
|Managing Directors||Forming a link between the board and the management team of senior executives, the MD needs to interpret the boards decisions but to ensure that they are put into effect by establishing an appropriate structure of delegated responsibility and effective systems of reporting and control. Day to day operations of the company places them in a position of considerable authority, which enables them to make important decisions without reference to the full board.|
|Executive Directors||Full time executive of the company, running a division or functional area within the framework laid down at board level.|
|Non-Executive||Role usually part-time, these positions are normally given out for a number of reason which could be to an individual knowledge, skills, contacts, influence and independence or previous experience.|
Advantage and Disadvantages of a Limited Company
The co-operatives societies are a self-help organisation, who have seen they numbers grow in the last couple of years within the UK because of their ethical views in providing the provision of chap, unadulterated food for its members, this has also allowed their members to have a share in the organisation’s profit.
This growth has seen the organisation boasts a multibillion-pound turnover and which holds its membership numbers in millions. The business, has grown not to only include food stores but to include in their portfolio, numerous factories, farms, travel agencies, opticians, funeral parlours, banks and an insurance company.
The twenty-first century has seen that the co-operative group remain a powerful force in the British retailing industry – it has been estimated that around 85,000 people are employed under the group which has seen them become the largest consumer co-operative employment group. Following the merger of the Co-operative group and United Co-operatives, saw it firmly place the retailer in a position in the UK to be a trusted and ethical brand name.
Legal Key Points
They are registered and incorporated, like most companies but are detached from the normal set up as this business is owned by their members. These members select an “area committees” to oversee trading in areas, committees have an annual elections and meetings for all members, these in turn select members on to a regional board and elect individual member to become directors to the group board.
Profit from the group’s activities are used to benefit the members, this comes in the form of a cash dividend paid to members in relation to their purchases. The differs from a standard company company because shares are not quoted on the stock exchange and members are restricted to the number of shares that they can be purchased. On a downside, they can sometimes rely heavily on retained surpluses and on loan finances which can be a heavy burden on members or the group.
Public corporation’s organisation are privately owned businesses, they are normally owned by individuals or groups who have chosen to invest in some form of business enterprise. This business comes in a variety of forms:
- central government departments
- local authorities
- regional bodies
- non-department public bodies
- central government trading organisations
- pubic corporations and nationalised industries
The State will own assets in various forms of businesses who are seen to provide a service to members of the public. These services are provided directly through government departments or through bodies that operate under delegated authority from central government. Statutory bodies are incorporated by special act of parliament and, like companies, have a separate legal identity from the individuals who own them and run them.
As a public corporation, there is a direct connection with the government, as the government will oversee the operation of the business and that the organisation compiles with the acts that has been set out. Public corporations are largely financed and owned by the state, this means that the organisation is required to be publicly accountable for any decisions that is made. Considerable degree of direct contact with customers from which they originate most of its revenue is seen as a nationalised industry.
Operated by or under a government department – the head of state appoints a board of management to run the organisation. The boards tend to exercise a considerable degree of autonomy on a day-to-day decision and operates largely free from political interference on most matters.
A franchise is a business whose sells the right to another business to operate as a franchise. The franchisor may run several of their own businesses but also may want to let others run the business in other parts of the country or world.
A franchise is brought by the franchisee, the franchisee is required to invest – often around £10,000 to £50,000 to acquire the franchise licence and to setting up the business. Once they have purchased, the franchise must pay a proportion of their profits to the franchisor on a regular basis. Depending on the business involved, the franchiser may have provided training, management expertise and national marketing campaigns and also supply the raw materials and equipment.
Example of franchises in the UK
- Clark shoes
- Pizza hut
- Holiday Inn
Reasons why franchising has become more popular
- Large companies have seen it as a means of rapid expansion
- Franchise provided most of finance-reduces investment in expansion
- Local entrepreneur with inherited or redundancy money sees opportunity to set up business with reduced risk
- Banks like combination of large company and small local businesses as a reduced lending risks
Advantages and Disadvantages of a Franchise
LO2. Demonstrate the interrelationship of the various functions within an organisation and how they link to organisational structure.
Links between different functional area
One of the most important factors to achieving the company’s goal is “communication”, being able to communicate what the company’s objectives are will determine how each department can function together to achieve the desired effect of success. But before any success is achieved, regular reviews are always made to make sure that each department is on the right path:
- How each function will and is performing to meet the objectives set up with each department.
- How the company is performing on a whole; the overall objective is to make sure that the company is working in the right direction.
In addition to regular reviews, each department will have the responsibility for supporting different types of aims and objectives, in a large organisation, it is usually easier to identify separate functional areas because each function works together in departments:
Sales and marketing: achieving targets linked to developing new markets or increasing sales.
Human resources: arranging staff training activities and supporting the continuous professional development of all staff
Finance: monitoring and support aims, and objectives linked to keeping costs low to improve profitability
Production: setting targets relating to quality or meeting planned production schedules.
Administration: providing support required by the business which will be from monitoring budgets to interviewing staff for their departments.
Customer service: providing a service to customers or clients who have an enquiry, concern or complaint
Distribution: ensuring that the product or service is delivered to the right place on time and in the right condition.
ICT: making sure that the IT infrastructure across the board is functional always for each department.
Research and development: concerned with new product development whilst see that improvements are made to existing products.
Fig 1. demonstrates the interrelationship that each function has with each other within the organisation to carry out the task that is related to its area:
In some organisation, a method of grouping is predomination in others, there will tend to be a variety of types and each has its own advantages and disadvantages. Responsibility for establishing the formal structure of the organisation lies with management and a variety of options is available. Whatever form is chosen, the basic need is to identify a structure which will best sustain the success of the enterprise and will permit the achievement of many important objectives. Structure should form the base of:
- Achieve efficiency in the utilisation of resources.
- Provide opportunities for monitoring organisational performance.
- Ensure the accountability of individuals.
- Guarantee co-ordination between the different parts of the enterprise.
- Provide an efficient and effective means of organisational communication, to create job satisfaction, including opportunities for progression.
- Adapt to changing circumstances brought about by internal or external development.
Structure of an organisation
Essence of structure is the division of work between individuals and the formal organisational relationships that are created between them. These relationships will be reflected not only in individual job descriptions, but also in the overall organisation chart which designates the formal pattern of role relationships, and the interactions between roles and the individuals occupying those roles. Individual authority relationships can be classified as line, staff, functional and lateral and arise from the defined pattern of responsibilities, as follows:
An organisation can be arranged according to a variety of structures, which determine how the organisation will operate and perform. Various functions of an organisation:
A functional organisational is one of the most common types of organisational structure, this is set up due to the fact that organisation divided departments into smaller group based on specialized functional areas or skill. Departmentalization allows for a larger operational efficiency because employees with shared skills and knowledge are grouped together by function, the structure of this organisation can be vertical and sometimes disconnected from each other.
|Functional departments arguably permit greater operational efficiency because employees with shared skills and knowledge are grouped together by functions performed. Each group of specialists can therefore operate independently with management acting as the point cross-communication between functional areas. This arrangement allows for increased specialization.||Structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. A recent trend aimed at combating this disadvantage is the use of teams that cross traditional department lines.|
Each division within this structure is grouped within the organisational to function into a division, these divisions can correspond to either products or geographies:
Product departmentalization: a divisional structure organized by product by product departmentalization means that the various activities related to the product or service are under the authority of one manager.
Geographic departmentalization: this involves grouping activities based on geography, such as Asia/Pacific or Latin American division. This division is important if tastes and brand responses differ across the regions. Each division contains all the necessary resources and functions within it to support that product line or geography.
A multidivisional form is a legal structure in which one parent company owns subsidiary companies, each of which uses the parent company’s brand and name. The divisional structure is useful because failure of one division doesn’t directly threaten the other divisions. In the multidivisional structure, the subsidiaries benefit from the use of the brand and capital of the parent company.
|Works best for companies with wide variance in product offerings or regions of geographic operation. The divisional structure can be useful because it affords the company greater operational flexibility.||divisional structure can include operational inefficiencies from separating specialized function. For the multidivisional structures, increased accounting and taxes.|
The matrix structuregroupsindividuals simultaneously by two different operational perspectives. Matrix structures are complex and versatile, this structure can be found manly in larger companies who are operating across different industries or geographic regions.
There are those that suggest that the matrix management set up is more dynamic than functional management where it allows team members to share information more readily across.
|Allows team members to share information more readily across task boundaries, this structure also allow for specialization that can both increase depth of knowledge and assign individuals according to project needs.||The increased complexity in the chain of command when employees are assigned to both functional and project managers. The increase in complexity can result in a higher manager-to-worker ratio, which can in turn increase costs or lead to conflicting employee loyalties. Can also create a gridlock in decision making if a manager on one end of the matrix disagrees with another manager.|
A newer type of organisation structure mostly found in large companies. Teams are set up as groups of workers with complementary skills and synergistic efforts, these team work together towards a common goal. Each group can adapt to fulfil group and organisational objectives, some teams endure over time, whilst others are disbanded at the end of a project.
Teams may change over time; these groups can include members from different functions which is known as cross-functional teams. Although teams are characterized as less hierarchical, they typically still include a management structure/team.
Critics argue that the use of the word “team” to describe modern organisational structures is a fad – that some teams are not really teams at all but merely groups of staff. One aspect of team based structures are likely to persist indefinitely is the integration of team cultures within the broader structure.
Another newer type of organisational structure viewed as less hierarchical but more flexible than other structures. In this structure, managers co-ordinate and control relationships that are both internal and external to the firm.
At the organisational level, social networks can include intra-organisational or inter-organisational ties representing either formal or informal relationships. Open communication and reliable partners (both internally and externally) are key components of social network. Network is more agile than other structures, because it is decentralized, a network organisation had fewer tiers. A wider span of control, and a bottom up flow of decision making and ideas.
|Communication is less solid and flows freely, possible opening more opportunities for innovation. The structure is more decentralized, it has fewer tiers in its organisational makeup, a wider span and control and a bottom-up flow of decision making and ideas.||The network structures is more fluid and can lead to more complex relationships in the organisation, accountability may be less clear and the reliance on external vendors can be quite high. Such path can reduce the company’s core control over its operational success.|
The modular focuses on dividing the business into small, tightly knit strategic business units, which focus on specific elements of the organisational process. Interdependencies between modules tends to be weak, however, flexibility is extremely high.
An advantage of the modular structure is that loosely couple structures enable organisations to be more flexible and restructure more easily – a firm can switch between different providers and thus respond more quickly to different market needs.
Increased internalization and more tightly couple structures can produce better communication and intellectual property gains. As a result, some argue that the modularity of a firm should be limited to the extent the flexibility can afford to gain. Various degrees of modularity are possible; however, a business must be consistent in the degree of modularity it employs.
How the structure, size and scope of different organisations link to the business objectives and product and services offered by the organisation
For further analyse this report will look at the difference between the profit and non-fit organisation and how their structure, size, scope link to the business objectives, product and services offered by these organisations. The profit organisation selected is Econet Wireless Ltd and the non-profit organisation selected in Higher Life Foundation.
Econet Wireless Ltd – privately owned telecommunications business which operates and invests in Africa, Europe, North and South America and the East Asia Pacific Rim. The company offers products and services in the area of mobile and fixed telephone services. (Econet Wireless Ltd, 2017)
Higher Life Foundation – an organisation which invests in the education of children and young people, the organisation offers scholarships to orphaned and vulnerable children and offers those in further education local and international scholarships. (Higher Life Foundation, 2017)
These two organisations have been chosen because they show a key difference between the types of organisations that they are but are similar in the products and services that they provide. Econet Wireless is an organisation which looks at being a profit organisation which aims to work towards providing a profit for the business by offering the best quality products and services to the customer which will see the organisation expand their brand recognition. Econet Wireless operates on a larger scale with operations in Africa, Europe, North and South America and East Asia Pacific Rim, the organisation is ranked within the top 10 leading organisations within their industry with an estimated revenue of $3 billion (2011) and with over 10 million customers accessing they products and services daily. On the other hand, Higher Life Foundation looks towards offering a better quality of life to children and young people through education without concentrating on profit generation and receive help by fundraising through the public to continue their operations. The organisation operates from Zimbabwe, Burundi, Lesotho and South Africa, with an estimated 8000 children signing on to their learning hub which provides children access to online learning resources and with an estimated 250,000 children, from 1996 – 2015, who have gained scholarship through the program.
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Despite the difference between these two organisations, they show a strong link between them by offering products and services that will benefit and improve the communities in the areas that they operate in. HFL is closely associated with working with Econet Wireless because of the products provided through the business and the investment support which HLF receives from Econet Wireless, it can be said that Econet Wireless provides this support to HLF so that it can reflect the organisations corporate social responsibility for the further development of the lifestyle of the children and the young people in the community who they wish to improve further.
For this section, Econet Wireless will be considered for the in-depth analysis. As per the view of (put something here), an organisation structure is the perfect assembly of the different departments in the organisation in a systematic way to contribute to the overall goal of the organisation with the different business functions in an effective manner. There are many examples of organisation structures from simple structure, functional structure, divisional structure, matrix structure and team based structure. As the view in Persson (2013) the functional structure organisation, specialises from the different functional departments are assigned to work on one or more projects led by different departments or project managers.
Econet Wireless operates on a functional structure which is strongly followed throughout the organisation. The three-key business function that the business seems to concentrate on is 1. product stewardship, 2. supply chain integrity and 3. the satisfaction of the stakeholders – as stakeholders one requirements can be that of maintaining the financial report which is a vital part of the business function that can be used to show performance with efficiency.
- The product stewardship has allowed the organisation to focus on the specialisation and the innovation of products and services that they produce and offer to their customer. With this, the organisation can meet the demands set by their customer and maintain the high quality of products produced and to ensure that there is a responsible guideline to sourcing their produce/services.
- The organisation supply chain can strongly be connected to the operational department, it must be seen always that they are offering their product and service to customers which is fair and ethical – produces/services must meet the standards set by trading standards within each country that they operate in.
- The satisfaction of the stakeholders is the last business function, as stakeholders mission is to offer the best product and service in the market with the reasonable, pricing strategy in an effective manner.
A strong interrelationship between each functional department is needed to continue and maintain the company/stakeholders mission to provide products and services that not only reflect the organisation but the pricing strategy of the organisation in an effective manner.
The performance of different departments is clearly reflected in a functional structure, this structure has been adapted by Econet Wireless based on the organisation structure of having different functions managed from the top down via different functional heads, the only way for this structure to change is only if there is a change in the interrelationships between the organisation functions in an effective manner. For example, if the specialist’s groups of Econet Wireless are not performing their takes as per the organisation structure, a restructuring could lead to a structure in a matrix structure, where the organisation could be grouped by both product and function – this would lead to each function having a separate internal division for each project. It is unclear how such an impact will have on an organisation which has been operating for more than 10 years because for any change can be seen as a negative impact from an employee point of view and they could likely feel discouraged about their presence due to the sudden systemic change in the organisation.
As per the view of Andrew Neang, change management is a systematic activity to prepare an organization for and implement ongoing environmental changes in a business operation. So, to speak, change management is about innovative strategies and speedy activities to deal with variable and sudden changes. It is very easy from a business perspective to understand that change is needed for any organisation to stay functional within their industry but at the same time, that change also means the demotivate in employees to work in a new culture and to not only be influence by the organisational structure but to be influence by the organisation culture.
The advantages and disadvantages of interrelationships between organisational functions and the impact that can have upon organisational structure
With different types of organisations there are various aspects which are related and connected, these aspects must be analysed effectively to better understand the impact that it will have on an organisation. For every organisation, has its own function and procedures which can be affected by the organisational structure and additional related aspects. There are numerous organisational functions which vary in different organisation but some of them are defined and explained as follows:
Planning: An essential function within an organisation as the decisions made in planning will have an impact on the entire activities within the whole of the organisation. This department also sets up the framework for new business ventures, as there needs to be analyses done on the different factors that will make a difference on the activities that will be executed within the organisation and which will lead to the effective results that will lead to the success of the organisation. It is also required for any organisation to adopt strategic decisions when any planning is in process, this will result in an alternative process to be analysed and evaluated which will lead to the most effective result being selected for the organisation. Different types of organisation adopted to different types of planning:
- Sole partnership: limited scope planning as the owner takes decisions after analysing.
- Partnership firm: conduct effective planning so that the appropriate decisions relating to the organisation can be made.
There is one clear aspect related to planning, which is the various decisions that is made by the company in the process of planning and to ensure that an effective decision is made which will impact the overall performance of the organisation in a positive way.
Management: An essential and important function in any organisation is management, as these are the leaders who have the task of implementing the decisions that are made within the organisation and which will impact the overall performance of the organisation and their objectives.
- Sole partnership: management done by the owner of the business.
- Partnership: management is done by the partners who are active and manage the firm. This management will depend on the organisational structure of the company.
The aim for any organisation is to be able to show their productivity through their profits but this can only be successful through effective management by teams who are engaged in the management of the organisational activities.
Administration: This is the function that can have an overall impact on the performance of the organisation, the mission of administration is to effectively execute the decisions related to the activities of the organisation.
- Sole trader: all the administrative decisions is made by the sole owner who runs the business in an effective manner.
- Partnership firm: administrative decisions by mutual concern and analysing the aspects and selecting the most effective process.
In any company, administration takes an actual role in the organisation. This is adopted in a hierarchy of activities which sees the flow and delegation of roles and responsibilities spread out in the organisation, this process can make for a positive impact on the overall performance of the organisation.
Control: The controlling of activities within an organisation is always needed and required, it is described as an important factor in the organisation in which effectives steps are made to monitor and adopted various tools and techniques related to monitoring and control the overall activities of the organisation.
- Sole traders: effective monitoring steps is taken by the owner.
- Partnership firm: control done by the partners in which they can control all activities.
LO3. Use contemporary examples to demonstrate both the positive and negative influence/impact the macro environment has on business operations
In this report, study has been conducted on Liquid Telecom, a Limited company with offices in London and Southern Africa. The report will look at the influence and impact that the macro environment has on this business which operates out of UK and Southern Africa.
Liquid Telecom is a subsidiary of Econet Group, Liquid Telecom first started life as the satellite and voice operator Econet Satellite Services, which was founded in 1997. In 2004, it rebranding to Liquid Telecom, the company went onto launch high-speed, cross-border fibre network linking southern Africa to the rest of the world in 2009. Liquid Telecom has now grown to provide services to more than 50 global wholesale carriers operating in eastern, central and southern Africa, Europe, North America and Asia Pacific, as well as the national and international enterprise market.
They are the leading independent data, voice and IP provider in eastern, central and southern Africa. They are the leading supplier of fibre optic, satellite and international carrier services to the leading Africa mobile network operators, ISPs and businesses of all sizes. It also provides payment solutions to financial institutions and retailers, as well as award winning data storage and communication solutions to businesses across Africa and beyond. (Liquid Telecom, 2017)
Macro environment – PESTLE Analysis
Political factors – This is one of the major macroeconomic factors which is an implication on the function that runs through Liquid Telecom as an organisation. It is the government policy which is set that affects the organisational functions like the taxation policies, law of the country, rules & regulations of trade restriction. The legislation or the acts set by each country plays a major factor which is dealt with daily as this affects the ongoing concerns of the organisation. The political stability of major countries in Africa is another important factor:
- The stability allows the company to provide a stable Telecommunication service to their consumers.
- An unstable country will not cope over the standards and political requirements of the organisation.
In major parts of Africa, the organisation has been able to deepen its root both socially and politically, this has allowed the organisation to build a level of stability which has been favourable in the territory of its operations.
|Positive impact||Negative impact|
|The business functions of Liquid Telecom are that they provide the restrictions on the unfair trade practices and control the activities of the organisation.||The political factors interfere in the business activities which prevents the freely practice which the business wished to function under.|
Economic factors – The economic factors are different from country to country as demand to supply all depends on the lending rates, wages rate, inflation & growth rate of an economy in the country that the organisation operates in. Liquid Telecom continues to look towards always being ahead of their competitors by always tipping into the latest trends within their industry or reinvesting into newer products that can be offered to their consumer.
With the ever-changing global market, Liquid Telecom like other businesses in Africa can be greatly affected by global slowdown but on contrary investing in emerging markets hedges its investment portfolio to benefit steady returns for the near future, for example acquiring the South African company Neotel in June 2016 – this bold acquisition will provide the foot hold that is needed to continue to be the largest pan-African Telecommunications service provider.
|Positive impact||Negative impact|
|the economic factors of the business functions of Liquid Telecom continuously show the economic changes across different countries and with the change in supply demand, helps to recognize the needs and functions according to the need of the consumer.||there is always an understanding that a global economic recession, which affected the major part of world economies, can infect affect the organisation – so there is always the idea to expand & hedge their portfolio for economy security.|
Social factors – Social factors are those that involves the lifestyle, wealth and the religion of the people of the society and their culture which affects the business functions and the marketing strategy of the company.
Liquid Telecom has learnt largely from the interaction that is has with society that is operates in and it says it all in their motto “belief that everyone in Africa has the right to be connected” (Liquid Telecom website). They do not take for granted their responsibility as an organisation and they have in place a structure that will in return be favourably to the society that it operates in. Liquid Telecom in turns runs a corporate social programme to support various charities towards funding towards education, health care and computers to school.
|Positive impact||Negative impact|
|The business functioning in a way that the culture and the religion of the society accepts the changes and the innovation which improves not only the functions of the organisation but the consumer.
Provide a programme that give back to the society through various charities.
|Restrictions for the company can also be from the religion and the culture of the society that they operate in – the organisation must operate in a way which is accordingly to be able to benefit from the sales and to maintain their customers.|
Technological factors – This factor relates to the ever-changing technology and the techniques that is needed to work within an organisation – new technology impacts the organisation in a manner that provides training to employees.
Liquid Telecom is a technological savvy organisation and has the best updated technology used across Africa, technology is a major trigger for the change for any industry which is where the organisation is continuously staying ahead of in the market that it operates in. The market has switched itself from the regular old market to online platform form and with that the introduction of E-commerce has been established, it plays a vital role in the success of the organisational structure.
The organisation has a hand on approach to the way that it operates, they products and services are not found on their website, but they have provided the opportunity to employ those in the community to work in the field on they behalf – apart from that it has a huge platform for supply chain relationship. There is continuous backup IT team working day/night for regular updates, as with great technology there comes a great threat from hackers – to cope with the situation and to avoid vulnerability of threat there is a separate security team for liquid Telecom online platform.
|Positive impact||Negative impact|
|impact of the technological factor is that it provides the company or the organisation to run with the new technology and compete with the competitors||negative impact of the technological factors is that it provides the continuous changes in the technology which disturbs the organisational functions and operations and affects the overall business of the organisation.|
Environmental factors – The environmental factor looks at the involvement of the biological changes in the environment and what can affect the organisational functions. The environmental changes be the seasons, disasters, pollution which will have a direct effect on the organisational and its functions.
Liquid Telecom focuses on environmental preservation by focusing on how they can acquire raw material, nature or reclassified form of natural objects. The organisation is focusses on better use of sustainable material which they can use in their products which they mainly lay in the ground (optical fibre) in an effective manner.
|Positive impact||Negative impact|
|The influence on the Liquid Telecom to ensure that they are prepared for the risk preventive actions that the changing environment can have on the organisation, to also provide a chance for the company to work according to the environmental factors which is laid out for the industries which they operate in.||The organisational can sometimes take a long process to cope with the result of the environmental factors which delivers a delay in reaching the organisational objectives and in achieving the conclusion of the organisation functions on time.|
Legal factors – The different laws and tax laws which are provided on the business functions such as sales, manufacturing, purchasing – these functions get affected by the legal factors set by different countries.
Liquid Telecom works as a multinational organisation which means that it must collide with the various laws of the different countries that it operates from – the organization must work under conditions where it is imperative to follow the laws and regulations of the states in the various African continental countries.
|Positive impact||Negative impact|
|The legal factors are on the functions of the organisation to provide the anticipation from the extreme corruption and the unfair inflow and the outflow of business trading.||The business functions are continually affected by the enhancement in the cost of production to Liquid Telecom, also changes in laws on regular basis provides the changes in the functions and the operations of the business|
LO4. Determine the internal strengths and weaknesses of specific businesses and explain their interrelationship with external macro factors
The SWOT analyse is the technique by which it can assistance the business in better understanding the strength and weakness of the organisation, this method is also used in conjunction to recognize both the opportunities that is available and the threat which the business may face. The SWOT analyse would additionally support the strategy of the business which in the long run helps the organisation in distinguishing its self from their competitors. The strength and weakness are generally internal to the company whereas opportunity and threats are external to the business.
Strength – Their advantage in the African Telecommunication market has allowed the organisation to have a competitive advantage over their competitors. Managers of Liquid Telecom should continually work on how the current process of the company can be made better and how to use the process to increase their market share. The organisation also should identify what their consumer finds good in their company product and the factor which causes their sales in the market to be at an advantage to those of their competitor. Liquid Telecom must find unique ways of constantly selling proposition to present to their consumer which will help them increase the market share. To make the effective use of the organisations strength, management needs to compare it with their competitors and how it can use this knowledge to increase profit.
- It uses enormous innovation in its products.
- The company has the brand image by which it is better knowledge among the customers.
- It works on the integrated supply chain.
- Various products are offered by the company
The management of Liquid Telecom needs to examine the shortage in the existing process and find the measures to remove these problems. The weaknesses within the organisation can be found after classifying the improvements which are needed to make within the company and looking at what needs to be avoided. The company needs to check what the other offices see as weaknesses and what their competitor is doing better.
Creating a list of opportunity could influence management of Liquid Telecom to see what is available in the market, this will also allow the company to then be able to venture into newer markets, making the effort to capture the new market, gives them the opportunity to increase the company share in the market. The list also be an opportunity to be able to select the best opportunity where the business can use the company current capacity and resources from different networks already established, taking advantage of the changing technology and the changing market.
- It is expanding its business line.
- It is introducing the business to new markets of the developing countries.
To continuously be at an advantage within the market, Liquid Telecom need to identify what they as a company consider as threats which may affect the business and what it will take to avoid these threats. The major threat towards the organisation now comes from their competitors, so the company needs to regularly check the activity of these competitor. The company also needs to frequently check the satisfaction level of their customers and that this is not decreasing with the company product and services. There should be regular check over the area which may cause major threat to the business.
- Facing the huge competition.
Interrelationship with external macro factors
The risk factor in the macro environment is always continuously appearing and it can sometimes be difficult to identify these risks at first hand. Major changes are what can be seen from the external environment which can sometimes be outside of the control of the business. To avoid such risk, management need to foresee the impact that these changes will have on the business before it occurs, so therefore adjustments can be made to protect the business and its products. One way to avoid any external threat in the market, is for the company to take the appropriate measure against the company’s current weaknesses. With changes in the macro environment, managements need to be aware of the possible changes that could result in the company making a loss. The management team of Liquid Telecom recognizes its current strength and captures new opportunities that are in the external market that will set them apart from their competitors.
It can be concluded that Liquid Telecom continuously success in the market all comes down to the effective way that is manages all the factors which does and doesn’t affect the business environment. The management team have drawn up a strategic plan to be able to analyse and better comprehend the effect that these factors will have on the business. I can say, that this method of working does help the organisation avoid the risk which may affect the function of the business and helps it in the meantime to avoid a loss of business. The management team can also use the functional structure of the business to control the internal factor of the business by effectively distributing the work between various units and departments.
For this assignment, the macro environment analysis has been done using the pestle analysis and the internal analysis has been done with the help of the SWOT analysis model. With the help of the macro environment analysis, has been identified that the impact of the legal and the political factors are strong not only in the UK but globally, global legislation plays a key role in the way that it influences the operations of any organisation. It is clear to see that the decision of product development in a country that an organisation operates in, is all based on the product innovation to meet the demands of the market and as well as abiding by the rules and the regulations of the market in an effective manner.
The macro environment analysis is used to influence the decision-making process for the organisation so that they can make strategic decisions regarding competitive pricing, adaptation for product innovation, effective marketing campaign and effective customer service to target customers in an effective manner. Apart from the internal analysis, with the help of effective SWOT analysis, allows the organisation to undertake the most effective decisions to meet their objective and goal of the organisation in regard to offering a product and service that is of high quality to their customer. The strength factor of any organisation is within its supply chain and to be able to facilitate the decision-making process of the company, so that it can focus on suppling a service to their customers within a competitive market. The weakness factor could be the low international expansion which influences the decisions for the further international expansion of the brand geographical.
From the analysis carried out it can be said that these analysis of the internal and external factors process is the most effective tool to allow the effective strategic move for any firm, what is important is the effective decision-making approach of managers and leaders and the way that their decisions are influenced so that they can reach the goals/objectives of an organisation effectively. The opportunity for the global expansion and the threat factor from the imposed taxes from the different regions of the business trade also influence the decision-making process to accomplish the business objectives in an effective manner. The opportunity fact as well by considering the degree of the internal and the external forces that the firm use to face as their daily challenge
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