1 – Understand the business environment

The topic aims to provide an understanding of the external factors that shape the business environment and impact the operations of organisations.

The topic examines the business environment, including the various elements that make up the external environment, such as economic, political, technological, and cultural factors. It will also cover the key issues that affect businesses, such as globalisation, digitalisation, and sustainability.

The topic delves into the specific environment in which the people profession operates. This includes understanding the role of human resources, the impact of labour laws and regulations, and the importance of managing employee behaviour and engagement. The module will also cover the impact of cultural diversity on organisations and the importance of cultural intelligence in the business world.

The key external influences that impact business environments

One of the key components of this learning module is understanding the external forces that impact an organisation’s current and future activities. Some various tools and frameworks can be used to analyse the external environment, such as STEEPLE and SWOT analysis.

STEEPLE analysis is a tool that helps to identify the major external factors that can impact an organisation. It stands for:

• Social: demographic and cultural factors that influence consumer behaviour and purchasing decisions.
• Technological: technological advances that can disrupt traditional business models or create new opportunities.
• Economic: economic conditions such as inflation, interest rates, and GDP can affect an organisation’s revenue and costs.
• Environmental: factors such as climate change, resource scarcity, and environmental regulations can impact an organisation’s operations and reputation.
• Political: laws and regulations that can affect an organisation’s ability to conduct business and its compliance obligations.
• Legal: legal and ethical considerations must be considered by the organisation.
• Educational: the educational level of the population and the skills of the workforce can affect the organisation’s ability to recruit and retain employees

SWOT analysis is another tool that can be used to inform understanding of the market(s) in which the organisation operates. SWOT stands for:

• Strengths: internal factors that give an organisation a competitive advantage, such as a strong brand, skilled workforce, or proprietary technology.
• Weaknesses: internal factors that limit an organisation’s ability to compete, such as a lack of resources or expertise.
• Opportunities: external factors that the organisation can capitalise on, such as a growing market or new technologies.
• Threats: external factors that could negatively impact an organisation, such as increased competition or economic downturn.

By conducting a STEEPLE and SWOT analysis, an organisation can better understand the external forces impacting its current and future activities and use this information to make strategic decisions about how to respond to those forces.

These tools help understand the external factors that affect the organisation and its environment and help it make strategic decisions in response to external forces.

Organisational goals and why organisations need to plan

An important aspect of this topic is understanding an organisation’s long-term vision and short-term goals, as well as its business structure, documentation and employment climate.

An organisation’s vision and goals provide a clear direction and help guide decision-making. A long-term vision is a statement that describes where the organisation wants to be in the future, while short-term goals are specific objectives that need to be achieved within a certain timeframe. Both long-term vision and short-term goals should be aligned with the organisation’s mission and values.

In the United Kingdom, there are several different types of business structures that organisations can choose from, each with its advantages and disadvantages. The most common types of business structures are:

Business Structure	Explanation	Advantages	Disadvantages
Sole trader	A business owned and operated by a single individual who is responsible for all aspects of the business and has complete control over its decisions. This is the UK’s simplest and most common form of business structure.	– Easy to set up and manage. – No legal formalities – Minimum compliance cost. – The owner has complete control over the business	– The owner is personally liable for the business debts and legal issues. – Limited access to capital. – The owner bears all the risk and responsibility.
Partnership	A business owned and operated by two or more individuals, known as partners. Partners share in the profits and losses of the business and are jointly liable for its debts. This structure is often used for professional practices such as law firms and accountancy practices.	– Easy to set up and manage – Shared decision-making and responsibilities – Access to more capital and expertise	– Joint liability for the business debts and legal issues – Difficulties in managing and resolving disputes between partners – Limited life of the partnership
Limited liability partnership (LLP)	A hybrid structure that combines elements of a partnership and a limited company. Like a partnership, an LLP is owned and operated by two or more individuals, known as partners. However, unlike a partnership, the partners of an LLP have limited liability for the debts of the business. Professional practices often use this structure that requires limited liability protection, such as accountancy or law firms.	– Limited liability for the partners – Flexibility in management – Shared decision-making and responsibilities	– More compliance cost – Limited life of the partnership – Difficulties in managing and resolving disputes between partners
Limited company	A business legally separate from its owners is known as a shareholder. Shareholders have limited liability for the debts of the business, meaning they are only liable for the amount of money they have invested in the company. This is the most common structure for larger businesses.	– Limited liability for shareholders – Potential for outside investment – Increased credibility and professionalism	– Complex compliance and reporting requirements – Increased costs to set up and maintain – Shareholders have no direct control over the management
Public limited company (PLC)	A limited company that has the right to sell shares to the public. PLCs are often large, well-established companies listed on the stock exchange and subject to additional regulations.	– Potential for outside investment – Increased credibility and professionalism – Potential for share trading.	– Complex compliance and reporting requirements – Increased costs to set up and maintain – Shareholders have no direct control over management – Subject to additional regulations and oversight

Each of these structures has its own set of legal and financial requirements, and it is important to consider the business’s size, nature and goals before making a decision. It’s always a good idea to seek professional advice from a lawyer or accountant before choosing a business structure.

Organisational documentation is important in communicating the organisation’s structure, policies, and procedures. Examples of documentation include the organisational chart, job descriptions, and employee handbook.

The employment climate refers to the conditions under which employees work within an organisation. It includes factors such as employee engagement, job satisfaction, turnover, and morale. An organisation with a positive employment climate is more likely to attract and retain top talent, which can help the organisation achieve its goals.

By understanding an organisation’s long-term vision and short-term goals, its business structure, documentation, and employment climate, one can better understand how the organisation operates, its strategies and how it will achieve its objectives.

Setting Objectives

The process of setting objectives and planning typically begins with an analysis of the organisation’s external and internal environment. This includes conducting a SWOT analysis and evaluating the organisation’s strengths, weaknesses, opportunities, and threats. The information gathered through this analysis helps the organisation identify its long-term vision and short-term goals.

Once the organisation has established its objectives and goals, it will develop a plan to achieve them. This plan will include specific strategies and actions the organisation will take to reach its objectives. The plan should also include timelines, resources needed, and metrics to measure progress.

The organisation’s objectives and planning are closely linked to its policies and people practices. Policies are a set of guidelines and procedures that the organisation follows to achieve its objectives. People practices refer to the ways in which the organisation manages its human resources, such as recruitment, training, performance management, and employee development.

For example, suppose the organisation’s objective is to improve customer service. In that case, its plan may include increasing employee training on customer service, implementing a customer feedback system, and setting employee service targets. The organisation’s policies and people practices would then be aligned with these strategies, such as creating a customer service training programme, implementing a customer feedback process and setting employee customer service targets.

By understanding how organisations inform and determine their objectives and planning and how these link to the policy and people practices, one can better understand the organisation’s strategic approach and how it aligns its internal processes with achieving its goals.

Business Continuity Planning

Planning is essential to ensuring business continuity, which refers to an organisation’s ability to maintain or quickly resume its critical operations and functions during unexpected disruptions. Planning is necessary for business continuity for several reasons:

• Anticipates potential disruptions: Planning helps organisations identify potential risks and disruptions that could affect their operations, such as natural disasters, cyber-attacks, or supply chain disruptions. This allows organisations to take proactive measures to mitigate or prevent those risks.
• Establishes a response plan: Planning helps organisations develop a clear and detailed response plan outlining the actions that must be taken during a disruption. This plan should include procedures for emergency response, evacuation, and communication with employees, customers and other stakeholders.
• Maintains critical operations: Planning helps organisations identify and prioritise their critical operations and functions, such as production, logistics, and customer service. By maintaining these critical operations, organisations can ensure that their ability to deliver goods and services to customers is not compromised during a disruption.
• Ensures recovery and continuity: Planning helps organisations establish procedures for recovery and continuity after a disruption. This includes identifying and establishing alternative facilities, equipment, and suppliers, as well as procedures for restoring normal operations as quickly as possible.
• Compliance: Many industries have regulations and standards requiring organisations to have a business continuity plan. For example, financial institutions and healthcare providers must comply with Basel III and HIPAA regulations, respectively.

Overall, planning is necessary for business continuity because it helps organisations anticipate and respond to potential disruptions, maintain critical operations, ensure recovery and continuity, and comply with regulations and standards.

Products and/or services the organisation delivers

The products and/or services that an organisation delivers and the main customers of those products and/or services will vary depending on the specific organisation.

For example, a manufacturing company may produce and deliver physical goods such as automobiles or consumer electronics, and its main customers may be wholesalers, retailers, or individual consumers.

A retail company may provide products and/or services such as clothing, electronics, and home goods, and their main customers may be individuals or families looking to purchase those products.

A service-based organisation such as a consulting firm may provide professional services such as strategy development, financial analysis, or marketing research. Their main customers may be other businesses or government entities.

A B2B business may sell its products to other businesses, and its main customers will be other companies.

An e-commerce company will sell their products or services to customers online. Its main customers may be individuals or businesses that purchase those products or services online.

In any case, understanding the products and/or services that an organisation delivers, as well as the main customers of those products and/or services, is crucial for the organisation to make strategic decisions about how to market, price, and distribute their products and/or services.

Identification of the products and services that the organisation offers

Identifying the products and services that an organisation offers, as well as the market within which it operates and the customers it serves, is a crucial step in understanding the organisation’s target market and making strategic decisions about how to market, price, and distribute its products and/or services.

The organisation should identify its products and services and each product or service’s specific features and benefits. The features of a product or service are specific characteristics or attributes, while the benefits are the advantages or outcomes that the customer receives from using the product or service. Understanding the difference between features and benefits is important for the organisation to market its products and services effectively.

The market within which the organisation operates refers to the overall industry or sector in which the organisation does business, as well as the specific market segments or target markets that the organisation serves. Understanding the overall industry and specific market segments can help the organisation identify trends, opportunities, and potential threats in the market.

The customers that an organisation serves can be segmented into different groups based on characteristics such as demographics, psychographics, and behaviour. By understanding its customers, the organisation can tailor its products and services to meet their needs better.

One tool that organisations use to identify customer needs is customer needs analysis. This process involves gathering data on customers’ needs, wants and preferences through various means, such as surveys, interviews, and focus groups. This information can be used to create products and services that meet customer needs and improve overall customer satisfaction.

A customer needs analysis can be represented in a table format as follows:

Customer Segment	Needs	Wants	Preferences
Demographic 1	Need 1	Want 1	Preference 1
Demographic 1	Need 2	Want 2	Preference 2
Demographic 2	Need 3	Want 3	Preference 3
Demographic 2	Need 4	Want 4	Preference 4

This table can be used to analyse the different customer segments and each segment’s specific needs, wants, and preferences.

• The customer segment column represents different groups of customers based on demographics, psychographics, and behaviour.
• The needs column represents the basic requirements that customers have for the products or services offered by the organisation.
• The wants column represents the additional features or attributes that customers would like the products or services to have.
• The preferences column represents how customers want the products or services to be delivered or presented.

For example, if an organisation sells clothing, the customer segment may be divided into different demographic groups, such as men, women, and children. The needs column may list the requirement of each segment, for example, men’s clothing needs may include durability, comfort and style, while women’s clothing needs may include fashion and fit. The wants column for men’s clothing may include eco-friendly materials and sustainable production methods, while for women’s clothing, it may include a wide range of sizes and colours. The preferences column for men’s clothing may include online shopping options and home delivery, while for women’s clothing, it may include in-store fitting and personal styling options.

This table format allows the organisation to identify each customer segment’s specific needs, wants, and preferences and create products and services that meet those needs and improve overall customer satisfaction.

Additionally, this table format can also be used to analyse customer feedback, complaints and testimonials and identify patterns in customer feedback, which can be used to improve products and services.

It’s important to note that this table is a simplified example, in practice, a customer needs analysis can be more complex and might require a more detailed and comprehensive approach, but this representation can be used as a basic guide.

Identifying the products and services that an organisation offers, the market within which it operates, and the customers it serves, and conducting a customer needs analysis is crucial for the organisation to be able to make strategic decisions about how to market, price, and distribute its products and/or services, and to meet the needs of its customers better.

Types of business/markets

Organisations can choose from several different types of business or market models, each with its advantages and disadvantages. Some of the most common types include:

• Agency: An agency model involves a third-party agent representing the organisation and its products or services to potential customers. The agent is typically paid a commission for each sale they make on the organisation’s behalf. This model is often used in real estate, insurance, and advertising industries.
• Direct: A direct model involves the organisation selling its products or services directly to the consumer through its retail outlets or an online store. This model allows the organisation to control the customer experience and build a strong brand reputation.
• Wholesale: A wholesale model involves the organisation selling its products or services to other businesses or intermediaries rather than individual consumers. This model is often used in industries such as manufacturing and distribution and allows the organisation to sell products in bulk at a lower cost.
• Online: An online model involves the organisation selling its products or services over the internet, through its website or through online marketplaces such as Amazon or Etsy. This model allows the organisation to reach a global customer base and to operate with a lower cost structure.

Each of these models has its own set of advantages and disadvantages, and the best model for an organisation depends on its specific circumstances, goals, and resources. It’s always a good idea to conduct a market analysis and to seek professional advice from a business consultant before choosing a business model.

Market segmentation

Market segmentation divides a market into smaller groups of consumers with similar needs or characteristics. Market segmentation aims to identify high-yield segments – that is, those that are likely to be the most profitable or that have growth potential – and then target them with specific products or marketing efforts.

There are several different ways to segment a market, and different methods may be appropriate for different products or services. Some common methods of market segmentation include:

• Demographic segmentation: This method segments the market based on characteristics such as age, gender, income, education, and occupation. For example, a clothing retailer may segment the market by targeting different age groups, such as children, teenagers, and adults.
• Geographic segmentation: This method segments the market based on geographic factors such as region, city, or climate. For example, a company selling outdoor gear may segment the market by targeting customers in regions with colder climates or those more likely to engage in outdoor activities.
• Psychographic segmentation: This method segments the market based on customers’ lifestyles, personalities, values, and interests. For example, a company that sells organic food may segment the market by targeting health-conscious and environmentally aware customers.
• Behavioural segmentation: This method segments the market based on customers’ behaviour, such as usage rate, loyalty, benefits sought, and readiness to buy. For example, a car manufacturer may segment the market by targeting customers who are in the market for a new car based on their purchase history and behaviour.

Market segmentation allows organisations to identify specific customers with similar needs or characteristics and create targeted marketing campaigns and products that meet those needs. It allows organisations to focus their resources on the market’s most profitable segments and increase efficiency and effectiveness in reaching the target.

The range of technology available within the people profession

The people profession encompasses a wide range of human resources, talent management, and organisational development activities. A variety of technology solutions are available to support these activities, including:

By utilising these technologies, organisations can improve working practices and collaboration within the people profession by automating time-consuming tasks, providing employees with better access to training and development opportunities, streamlining recruitment processes, and fostering better communication and collaboration among employees. Additionally, using data-driven tools such as predictive analytics and workforce planning can help organisations make more informed decisions about staffing and recruitment and better anticipate future workforce needs. Technology can play a key role in improving the effectiveness and efficiency of the people profession while also helping organisations to create a more engaged and satisfied workforce.

Here is an example of a table that lists different types of technologies and their applications:

Technology	Description	Applications
Wi-Fi	Wireless networking technology that allows devices to connect to the internet or a local network.	Connecting devices to the internet or a local network, the internet of things (IoT)
Internet	The global system of interconnected computer networks that use the Internet protocol suite (TCP/IP) to link devices worldwide.	Online communication, web browsing, online shopping, email, and more.
Email	Electronic mail is a method of exchanging messages between people using electronic devices.	Communication, sharing files, scheduling, and more.
Electronic forms of communication	Electronic forms of communication include instant messaging, video conferencing, and social media.	Communication, collaboration, and more.
Smartphones	A smartphone is a handheld device that combines a computer’s functions with a cellular telephone’s functions.	Communication, Web browsing, GPS navigation, Social media and more.
Social media	Websites and applications that enable users to create and share content or to participate in social networking.	Communication, Networking, News and more.
Cloud-based platforms	Cloud-based platforms are services delivered over the internet and accessed through a web browser.	Data storage, File management, Software as a Service (SaaS) and more.
Dashboards	Dashboards are graphical representations of data that can be used to monitor and analyse performance.	Data visualisation, performance analysis and more.
File management and document sharing	File management and document sharing refer to software and online services that allow users to store and share files.	File storage, collaboration, and more.
Cloud-hosting	Cloud hosting is a hosting service that uses a network of remote servers to store, manage, and process data, instead of a single local server or personal computer.	Data storage, software and application hosting, and more.
Synchronous collaborative software	Synchronous collaborative software enables real-time collaboration and communication among multiple users.	Team collaboration, remote working, and more.
Bluetooth	Bluetooth is a wireless technology that enables the exchange of data over short distances.	Wireless connectivity for devices, such as headphones, speakers, and more.
Voice recognition	Voice recognition technology enables devices to recognise and respond to voice commands.	Voice-controlled devices, such as smart speakers and virtual assistants, and more.
Fingerprint	Fingerprint recognition technology enables devices to identify and authenticate users based on their fingerprints.	Mobile device security, and more.
Facial and iris recognition	Facial and iris recognition technology enables devices to identify and authenticate users based on their facial features or iris patterns.	Mobile device security, and more.
Auto-responders	Auto-responders are automated email messages that are triggered by certain actions or events.	Email communication, and more.
Artificial Intelligence (AI)	AI is a branch of computer science that involves the development of algorithms and systems that can perform tasks that would typically require human intelligence.	Machine learning, natural language processing, image recognition and more.

This table is not an exhaustive list, as technology is constantly evolving, and new technologies and tools are frequently emerging.

Collective and individual technologies

Collective and individual technologies can change, improve, and affect working practices in various ways. Some examples include:

• Collective technologies, such as collaboration tools and synchronous collaborative software, can improve employee communication and teamwork. This can lead to more efficient and effective decision-making, faster problem-solving, and better coordination of tasks and projects.
• Individual technologies, such as smartphones and laptops, can enable employees to work from anywhere and anytime. This can improve flexibility and productivity and also help to reduce the need for commuting and office space.
• Artificial Intelligence can analyse data and identify patterns to inform decision-making, automate repetitive tasks, and improve the accuracy of predictions. This can lead to improved performance, cost savings, and increased efficiency.
• Cloud-based platforms can enable employees to access data and software from any location, allowing for more flexible and remote working arrangements. This can also improve team collaboration and reduce the need for physical office space.
• Electronic forms of communication, such as instant messaging, video conferencing and social media, can improve communication and collaboration among employees, regardless of their location.
• Dashboards and data visualisation can provide real-time insights into performance and trends, helping organisations identify improvement areas and make more informed decisions.

Collective and individual technologies can significantly impact working practices by improving communication and collaboration, increasing efficiency and productivity, and enabling employees to work more flexibly and remotely. Organisations need to stay up-to-date with the latest technologies and best practices to take full advantage of the potential benefits.

Social and technological approaches

Various social and technological approaches can be used to improve communication, customer service, marketing, efficiency, productivity, and security. Some examples include:

• Social media and online platforms: Social media platforms such as Facebook, Twitter, and Instagram can be used to communicate with customers and promote products or services. These platforms can also provide customer service by allowing customers to ask questions and receive support in real-time.
• Chatbots and artificial intelligence: Chatbots and AI-powered virtual assistants can provide automated customer service by answering frequently asked questions and helping customers find the information they need.
• Cloud-based platforms and software: Cloud-based platforms can improve efficiency and productivity by allowing employees to access data and software from any location and collaborate in real-time.
• Video conferencing and collaboration tools: Video conferencing and collaboration tools, such as Zoom, Skype, and Slack, can improve communication and collaboration among employees, regardless of their location.
• Data analytics and reporting: Data analytics and reporting tools can be used to track performance, identify trends, and make data-driven decisions. This can help organisations to improve efficiency, productivity, and customer service.
• Biometric security measures: Biometric security measures, such as fingerprint recognition, facial recognition and iris recognition, can secure sensitive data and protect against unauthorised access.
• Encryption: Encryption is a secure communication technique that can protect data during transmission and storage against unauthorised access.

These social and technological approaches can help organisations to improve communication, customer service, marketing, efficiency, productivity, and security. Organisations need to stay up-to-date with the latest technologies and best practices to take full advantage of the potential benefits.

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