BUSINESS ENVIRONMENT AUDIT

APRIL 10, 2022

Contents
Introduction:..............................................................................................................................................2
LO1:............................................................................................................................................................3
1.1 Type, Purpose and Legal Structure of Organizations (P1):.........................................................3
1.2 Size and Scope of Organizations (P2):...........................................................................................3
1.3 Link between the structures, size and scope of different organizations and business objectives
with the products and services (M1):...................................................................................................3
1.4 Critical analysis of the complexities of different business structures and business
functions(D1):........................................................................................................................................4
LO2:............................................................................................................................................................5
2.1 Relationship between business functions – Link with structure and objectives (P3):................5
2.2 Advantages and disadvantages of relations between organizational functions – Impact on
organizational structure (M2):.............................................................................................................5
Landscape of Fashion Retail Industry in Pakistan:................................................................................7
References:.................................................................................................................................................8
Introduction:
The organizations that are chosen for this assignment are Nishat Linen and Khadi. Both of the
companies are the famous and top clothing brands of Pakistan. this report would focus on
developing the business profiles of both the companies. Type of company, size and scope of
business would be highlighted and discussed along with the industry of these companies. The
relationship between different organizational functions would also be discussed along with their
link with business goals and objectives. The advantages and disadvantages in this context would
also be discussed along with their impact on the organizational structure. There are different
complexities in different business structures, this would also be critically analysed in the report.

The business environment also impacts the factors like size, scope and type of business. It is
however the responsibility of the manager to take wise decisions and link these factors with the
products and services of the company (Navarro, Acosta and Wensley, 2016). It is important for
the businesses to have a clear insight on the organizational structure and function. The macro
environmental analysis of the business helps to assess the positive and negative influences
caused by the internal and external factors.
LO1:
1.1 Type, Purpose and Legal Structure of Organizations (P1):
Both Khadi and Nishat Linen are private organizations. Such organizations are controlled by the
stockholders and their main purpose is to maximize profits and wealth (Cook, 2016). The owners
of the private companies are the decision makers. On the basis of legal structure, Khadi is a
single member company and Nishat Linen is the private limited company. Nishat Linen is
modern, well equipped and vertically integrated textile company of Pakistan. Nishat Linen is a
private company that is owned by the Nishat Group. The company is not listed in stock
exchange. Nishat linen is the retail textile company of Nishat group.

1.2 Size and Scope of Organizations (P2):

Organizations differ from each other on the basis of size and scope. On the basis of size,
companies are micro, SME, transnational and global. Both Khadi and Nishat Linen are
transnational businesses with their business operations in more than one country. Due to
international operations, the number of employees are also high. Nishat linen is a big
organization which has around 90 stores in different cities of Pakistan. they also have different
stores outside Pakistan. Outside Pakistan, they have 14 different stores in 5 different cities of
UAE. Nishat linen has total of 1700+ employees in different stores of Pakistan and UAE. Khadi
on the other hand is a single member company. Khadi has a retail network of 61 stores in
Pakistan and 14 stores in Qatar, Bahrain, UK and UAE. Its annual revenues account for PKR 16
billion. Khadi has around 1500 employees across all locations.

1.3 Link between the structures, size and scope of different organizations and
business objectives with the products and services (M1):
There is a clear relationship between these factors which also help the mangers to take decisions
on increasing the efficiencies of business (Grundy, 2017). Companies like Khadi and Nishat
Linen are private sector business with dynamic business objectives. The size and scope of the
company can help in developing large number of products and services. These companies also
enjoy economies of scale which help in cost reduction and benefit maximization, thus creating
value for customers. The figure below shows the organizational structure of Nishat Group.
1.4 Critical analysis of the complexities of different business structures and business
functions(D1):
Business structures help in forming different types of organizations. Organizations with different
structures have various business functions. Nature of the structures of the business and their
interrelations are different from each other. However, in transnational business like that of Khadi
and Nishat linen, the business structure is complex to maintain different business functions. For
example, these companies, are directly involved in the decision making related to different
functions like marketing, research and development etc., were the interrelation between different
functions are ensured (Schaltegger and Wagner, 2017).
LO2:
2.1 Relationship between business functions – Link with structure and objectives
(P3):
Here, the business functions are interrelated and inter connected. They help the company to
operate successfully. The business functions cannot work in isolation (Snyder and Diesing,
2015). The four main business functions in Nishat linen include four different business units i.e.
marketing, human resources, operations and finance. There functions and departments are run by
skilled and qualified group of individuals. It is important to have synergy and effective
communication between the business functions as it is linked with achieving the goals, objectives
and targets of the organization (Thompson, 2017). Every function has its own goals and
objectives but functional goals and objectives lead towards achieving the business goals and
objectives. Every business function has different individuals who belong to different levels of the
organizational structure (Vecchiato, 2012). For example, both Nishat Linen and Khadi have rich
organization structure and maintain the organizational functions thus generating values for
customers. Functions are dependent on each other e.g. production depends on sales and sales
function takes decision on basis of R&D, distribution and finance functions (Joseph and Gaba,
2020).

2.2 Advantages and disadvantages of relations between organizational functions –

Impact on organizational structure (M2):
Advantages:

 It helps in maximizing the managerial efficiency.

 It helps in reducing the cost for the company.
 Effective communication between different functions.
 Achieving the organizational objectives in less time.
 Increasing coordination between employees at inter departmental level (Schulman, 2020).
 Work would be done according to function to avoid duplication.

Disadvantages:
 As different functional managers would be managing the project simultaneously, it would be
difficult to for client to know the correct status of the projects.
 Progress of project can get affected due to conflicts between functional managers.
 Lack of harmony, discipline and unity.
 Relationships can get affected negatively between different employees (Vithayathil and
Choudhary, 2022).
Landscape of Fashion Retail Industry in Pakistan:
Both Khadi and Nishat linen belongs to the retail fashion industry of Pakistan. The landscape of
retail industry of Pakistan has been undergoing changes continuously. Due to advancements in
science and technology and due to increase in digitalization, the customers are more inclined
towards online shopping. However, the customers still like and value the physical shopping
experience and are more inclined towards making most of their purchases through the traditional
brick and mortar stores. But they expect same shopping experience in online shopping as well.
due to increase in popularity of e-commerce across all the consumer demographics, the
landscape of retail industry has changed and moved towards online stores and online shopping
experience for the customers. And while smartphones are common among the generation Z
people and millennials, it is not at all difficult for them to experience online shopping.

The corona virus pandemic has also contributed a lot for the change in landscape of retail
industry. During lockdowns, isolation and quarantines; people did not visit shops and stores to
buy things. The trend of online stores and online shopping maximized during the pandemic.
Nishat Linen also considered the pandemic as an opportunity and launched their online fair price
shop. Initially, they had no presence of their fair price shop’s products online. They used the
ecommerce platform to develop an online store which helped them maximize their customer base
and profits during the pandemic. Khadi at the same time increased its efforts to sell the products
through online store as people were not visiting the physical stores to buy the products.
References:
1. Cegarra-Navarro, J.G., Soto-Acosta, P. and Wensley, A.K. (2016). Structured knowledge
processes and firm performance: The role of organizational agility. Journal of Business
Research, 69(5), pp.1544-1549.
2. Cook, S. (2016). Leading the Customer experience: Inspirational service leadership.
Routledge.
3. Grundy, T.D. (2017). Dynamic Competitive Strategy: Turning Strategy Upside Down.
Routledge.
4. Joseph, J. and Gaba, V. (2020). Organizational structure, information processing, and
decision-making: A retrospective and road map for research. Academy of Management
Annals, 14(1), pp.267-302.
5. Schaltegger, S. and Wagner, M. (2017). Managing the business case for sustainability: The
integration of social, environmental and economic performance. Routledge.
6. Schulman, P.R. (2020). Organizational structure and safety culture: Conceptual and practical
challenges. Safety science, 126, p.104669.
7. Snyder, G.H. and Diesing, P. (2015). Conflict among nations: Bargaining, decision making,
and system structure in international crises. Princeton University Press.
8. Thompson, J.D. (2017). Organizations in action: Social science bases of administrative
theory. Routledge.
9. Vecchiato, R. (2012). Environmental uncertainty, foresight and strategic decision making:
An integrated study. Technological Forecasting and Social Change, 79(3), pp.436-447.
10. Vithayathil, J. and Choudhary, V. (2022). Organizational Structure for the IT Department:
Profit Center or Cost Center?. Information Systems Frontiers, pp.1-24.