ATHE L3 Unit 2 How Businesses and Organisations Work Assignment Answers

Aim of this Unit 2

This unit aims to develop understanding of how big organisations and businesses operate and achieve objectives for these organisations for students who are pursuing the ATHE Level 3 certificate. This is the 2nd unit of this level; here students will gain knowledge of various types of organisational structure and objectives, the importance of customer service and legal identities. Here learners will learn about the human, financial, technological, and physical resources that are required for making a business successful.

Also, in this unit you will have the opportunity of learning major financial terms like income statements, cash flow statements and balance sheets, and the elements and purpose of budgets. Overall, this unit will make you learn to understand how organisation function effectively in a competitive environment. 

Note:

Do remember one thing: this sample is here for learning purposes only; do not make the mistake of copying the exact information from here into your assignment directly. In the ATHE course, every assignment is checked through AI and plagiarism detectors, and if you copy information from here, you will simply get caught for plagiarism and will fail. 

Assignment Scenario

Before progressing onto university to study International Business, you have managed to secure a 4-month management internship with a prestigious company in Oxford, England. Verto is a relatively small UK-based electric vehicle manufacturer focussed on making small, affordable electric cars and commercial vehicles. It has run the internship scheme for several years, offering just 10 places a year.  

If you complete the internship successfully, it will increase your chances of joining Verto’s graduate recruitment programme. Your responses to the tasks should be based on real businesses that you are familiar with. The businesses need to be Small Medium Enterprises (SMEs), although some sole traders may not be able to provide sufficient information required for the tasks. 

Task

The Head of Human Resources at Verto, Kareem Akram, is keen that interns understand the way in which businesses and organisations operate internally before they join the company’s different teams. He has produced an Induction Booklet you have to complete. The headings in the booklet will require you to do some reading and research about different aspects of how businesses and organisations work internally.  

AC 1.1. Outline the differences between strategic, tactical and operational objectives. Give an example for each objective. 

Answer:

Businesses establish goals to give direction and to assist them in attaining their goals. Objectives can be broken down into three broad categories: Strategic, tactical and operational. All three are linked together, but they vary in terms of purpose, time scale and the level of management under which they fall.
Strategic Objectives

Strategic objectives are the long-term targets that are aimed towards the direction of a business and future success. These goals are typically established by the top group of management or business proprietor and aim to guide the organisation in attaining its mission and vision. Strategic objectives typically take three to five years or longer and deal with decisions of size, growth, expansion or market position.

For example, the strategic goal of a company could be to expand market share by 20% over 5 years. Achieving this objective would help the organisation become more competitive and attract more customers.

Tactical Objectives

Tactical objectives are medium-term objectives that help to reach strategic objectives. These are typically determined by middle management and are targeted at individual departments of the company, like finance, marketing or HR. Tactical objectives break down long-term goals into realistic, manageable and measurable steps.

For example, a strategic goal for a company may be to grow market share, in which case the marketing team could have a tactical goal of creating three new advertisements in a year. This is an effective way to advance the business's long-term objective.

Operational Objectives

Operational objectives are the short-term objectives to help the business run on a day-to-day basis. They are typically defined by supervisors, team leaders or department managers and are very specific and measurable. Operational objectives give employees direction on what it is they should be doing on a daily, weekly or monthly basis.

For example: In the case of a sales team, they might want to reach out to 50 potential customers a week, or grow their monthly sales by 10%. These activities are aligned to tactical and strategic goals.

What is the relationship between the three objectives? How are the three objectives related to each other?

Strategic and tactical objectives are interrelated with an operational objective. Strategic objectives are the business's overall direction; tactical objectives are how departments are going to play a role in helping the business achieve its direction; operational objectives are the daily tasks required to meet the departmental goals that will support the business's strategic direction. Strategic objectives will be hard to achieve if there are no operational and tactical objectives.

AC 1.2. Explain factors that lead to the choice of objectives in profit-making and non-profit-making organisations.

Answer:

There are various reasons why organisations select their goals. The goals chosen will typically be influenced by the purpose of the organisation, its people, resources available and its environment. Profit-making organisations are primarily interested in maximising profit and growth, whereas non-profit organisations tend to be more interested in social, community or charitable objectives.

Purpose of the organisation

Profit-making organisation: Amongst the factors that have an impact on objectives is the purpose of the organisation. Profit-making organisations are established to make money and return money to the owners or shareholders. Consequently, they may have goals such as sales growth, profitability, new markets, and/or market share.

Non-profit Organisation: Non-profit organisations, on the other hand, are set up to serve or to support a specific cause. They tend to have goals that involve assisting others, community development or raising awareness of a matter of concern.

Stakeholders’ expectations

Profit Organisation: The goals that are selected by an organisation can be highly affected by the stakeholders. Shareholders may opt for financial growth and high returns in case of a profit-earning business. Consumers can demand good services and quality products, and workers can seek employment and job security. 
Non-profit organisation: Stakeholders for non-profit organisations can be donors, volunteers, service users and governmental bodies. These groups can influence objectives by encouraging the organisation to be effective in delivering the services and to achieve positive outcomes for the community.

Available Resources

An organisation's resources can also have an impact on its objectives. Businesses with a solid financial position can have lofty aspirations for expansion, including new branches, technology or going international. For organisations that have limited resources, the goals and objectives can be more realistic and can be achieved within the available budget.

Non-profit Organisation: many non-profit institutions depend on fundraising, donations and grants. As a result, they may have targets that are subject to changes based on the resources available to provide their services and the amount of funding they have.

Market and external Environment

Organisations’ goals can be affected by external changes. Factors may involve competition, economic conditions, government regulation and technology development, which influence decision-making. For instance, a company in an extremely competitive industry might opt for goals related to customer satisfaction and innovation to sustain its market presence.

Likewise, non-profit organisations can modify their goals to align with social issues, political changes and community needs. 

M1 Assess the Factors That Lead to Organisations Changing Objectives.

Answer:

You will not see a single organisation who keep a goal for its entire lifetime. Organisations, whether for-profit or non-profit, will change their goals as external and internal factors keep shifting, which ensures they stay successful and relevant. Market, economic and stakeholder expectations and technological changes are among the factors that can result in an organisation adjusting its goals.

Changes in the Market

One of the main reasons organisations change their objectives is because of changes in the market. Customers’ needs and preferences evolve with time, and businesses need to respond to them. Many retailers, for instance, have upped their game in online marketing because more customers have opted to shop online these days. In the process, organisations may tweak their goals to enhance their digital footprint or create new products and services.

Economic Condition
An organisation’s goals can be very influenced by economic circumstances. In times of economic expansion, companies can be in a growth mood, investing in expansion, market share and growth. But in times of economic downturn, the organisation may shift their priorities to cut down expenses, sustain cash flow and save jobs. Alternatively, if funding decreases, non-profit organisations may have to make changes to their mission.

Stakeholder Expectation

Stakeholders have the ability to affect the direction of an organisation. Shareholders might request more profit, customers might want more of the goods, and employees might want to work under better conditions. When stakeholders' expectations shift, organisation usually revisit their objectives to make sure they are still in agreement with expectations and continue to receive support from key stakeholder groups.

Technological Development

Technological progress may also prompt the change of objective within organisation. New tech can open up ways to be more efficient, cost-effective, and customer-friendly. For instance, a company can start using automation or adopt a digital system or create an online service to compete.

Government and Legal changes

Needs may change due to changes in the law and government policies. Businesses may need to adjust priorities and make different resource allocations as a result of new regulations in the area of employment, environmental protection or consumer rights. 

Judgement

All these factors are pertinent, but when it comes to why organisations change their objectives, it's typically because of market changes. Businesses who do not adapt to the evolving needs and trends of customers can end up losing their customers and losing ground in the competition. Market changes can affect other factors too, for instance, sales performance, profitability and investment choices, which can be significant factors in organisational change.

AC 2.1 Explain the Importance of Customer Service to Organisations.

Answer:

Customer service is the support and assistance an organisation provides to its customers, both before, during and after they buy. Caring for customers is essential in business because it helps establish good relationships, enhance the business's reputation, and achieve long-term success.

Customer Satisfaction and Loyalty.

One of the main reasons customer service is important is that it helps to increase customer satisfaction. Customers are more likely to have a positive experience if they receive friendly, helpful and professional service. When customers are happy, they're likely to come back, fostering greater customer loyalty.

Customer loyalty is worth a lot since it costs little to keep customers, compared to the cost of acquiring new ones. Familiar customers are more prone to refer the enterprise to family, friends and acquaintances.

Business Reputation

A positive reputation of an organisation can be enhanced with good customer service. The feedback from customers is frequently delivered via online reviews, social media and word of mouth. Positive feedback can lead to new customers and make the organisation stand out from the crowd.

However, when a business fails to provide good customer service, it can harm a company's reputation. Negative reviews can go viral and can deter new customers from coming to the business.

Improved sales and profitability.

By delivering superb customer service, you can achieve better sales and increased profits. A sense of being cared for positively increases customer retention by encouraging the purchase of extra services or goods. Repeat business is one of the ways that businesses can be successful in the long-term, and it is often due to their ability to provide good customer service.

For instance, many successful companies attach a lot of importance to customer service because they know that their customers will be more inclined to purchase from them if they are satisfied with their service.

Competitive Advantage

Customer service is crucial to a business that can set it apart from the competition in a competitive market. While the products and prices might be the same for different organisations, excellent customer service can lead customers to opt for one organisation over another.

Costs of Customer Service

While there are numerous advantages to customer service, there are also certain expenses associated with it. In addition, organisations may need to invest in employee training, customer support, communication technology and complaint handling procedures. Such investments can be costly, but usually must be made to provide a high level of service.

M2 Evaluate How Effective Customer Service Is Achieved for an Online Business.

Answer:

In an online business, customers are not in the position to meet its staff physically, so customer service becomes crucial. Consequently, organisations have to employ alternative means to deliver support, gain trust and ensure customer satisfaction. Customer service is most effective when it involves a combination of communication, technology, efficient processes and practices that put the customer in mind.

Fast Response Times

The quickness with which you respond to customer enquiries is one of the most important aspects of online customer service. When customers ask questions, have complaints or problems with orders, they want answers quickly. Live chat, e-mail support, and social media are all common methods that many online businesses employ to communicate with their customers.

Responding quickly can help to improve customer satisfaction and solve issues before they escalate into larger problems. But faster support might need more of the workforce and technology, which will cost businesses more.

User-Friendly Website

The other important factor is an easy-to-use website. Products need to be easily accessible to customers, and they should be able to order and access information without any problems. Having a user-friendly website with straightforward checkout and accurate product descriptions makes for a good customer experience.
An easy-to-use site can help minimise customer complaints and lessen the frustrations of using the website. However, website maintenance and updating can cost a lot of money.

Effective Complaint Handling

All successful businesses have complaints. How an organisation deals with complaints can make a significant difference to customer satisfaction. In a world where customers can be unpredictable, listening to their concerns, addressing them professionally and providing them with fair solutions can help retain them and maintain your reputation.

Inadequate complaint handling can result in bad reviews and/or the loss of future sales. So, a crucial aspect of online customer support is the effective handling of complaints.

Personalisation and Communication

Customer data is utilised in many online organisations to make individual suggestions, offers, and communications. This can lead to making customers feel appreciated and at the same time enhance their experience. Regular communication regarding orders, delivery and returns also helps in establishing trust between the business and its customers.

But organisations need to be responsible with customer information and adhere to data protection laws.

Evaluation and Judgement

While all of these are essential for a successful online customer service, quick response time is the most crucial. When issues occur with online delivery, consumers want them to be addressed immediately, and if they are not, they can become displeased. A good website and customised services are important; however, customers will remember how quickly and effectively their problem was solved.

AC 3.1 Analyse Different Organisational Structures.

Answer:

An organisational structure illustrates the way in which the responsibilities, authority and communication are organised in a business. The structure varies from one organisation to another as per their size, objectives and functioning. There are pros and cons with each structure.

Hierarchical Structure

A hierarchical structure is one of the most common organisational structures. There are different levels of employees; the higher being the senior managers and the lower being the employees. All staff are managed by their manager, who is one level up in the hierarchy.

A hierarchical organisation is used by many large organisations because it is clear and has lines of authority and responsibility.

Advantages

• Established line of command.
• Staff are aware of their line of accountability.
• Decisions can be controlled by senior management.

Disadvantages

• Communication is slow.
• Staff might not be as involved in decision-making.
• Excessive administrative hierarchy can lead to bureaucracy.

One such successful example is Tesco, who have a structured management system that is in place throughout their stores and departments.

Flat Structure

A flat structure allows for more responsibility for employees and fewer layers of management. This is typically employed by small companies or start-up firms.

Advantages

• Faster communication.
• Staff can feel better engaged and motivated.
• Decisions can be made in a faster time.

Disadvantages

• There might be too many employees for the manager to supervise.
• As the business expands, the roles and responsibilities can become unclear.
• May be hard to handle large organisations.

A flat organisation is used by many small companies and start-ups in their infancy.

Functional Structure

A functional structure is a structure that brings together people according to their specialisation, for example, marketing, finance, human resources and operations.

Advantages

• Staff acquire specialist skills and knowledge.
• Departments will be able to function effectively in their field.
• Establish clarity of roles in each function.

Disadvantages

• Departments can work on their own objectives only.
• Interdepartmental communication might be restricted.
• Decision-making may be delayed at times.

A functional department is used by a company like Coca-Cola to run its business around the world.

Matrix Structure

A matrix structure is a blend of functional and project structures. An employee can have more than one manager, e.g. a departmental manager and a project manager.

Advantages

• Promotes cooperation with other departments.
• Utilises the skills and expertise of employees to a greater degree.
• Improves flexibility.

Disadvantages

• Conflicting instructions are possible for employees.
• Reporting relationships can be confusing.
• Project management can get more complicated.

In large organisations with projects, matrix structures are frequently employed because they involve staff from various teams.

AC 3.2 Analyse Different Legal Identities of Businesses.

Answer:

A legal identity is the legal form in which a business is conducted. The legal form of a business may impact the way the business is run, taxed and sued for business debts. The various legal structures come with their pros and cons, and businesses select the one that best aligns with their goals and requirements.

Sole Trader

A sole trader is a business that is owned and operated by a single individual. It is the easiest and most widely used method of business ownership, particularly for small businesses.

Advantages

• Simple and cost-effective to install.
• All the profits are retained by the owner.
• Quick decision-making without asking other people.

Disadvantages

• The owner is fully liable and is liable for paying off the debts of the business.
• Finding funding can be challenging.
• The company could find itself constrained by resources and thus unable to grow.

A sole trader might be a small business in your area such as an electrician, plumber or hairdresser.

Partnership

A partnership is a business that is owned by two or more people who share the responsibilities, profits and losses of the business. Partnerships are common in professions such as law, accountancy and healthcare.

Advantages

• There is increased opportunity for capital investment.
• Responsibilities can be shared between partners.
• There might be differences in skills and experience between partners.

Disadvantages

• There is a need for profit sharing.
• Relationships with partners can be challenging.
• In many partnerships, the partners are jointly and severally liable for the debts of the partnership.

For instance, a local accountancy practice run by a number of partners.

Private Limited Company (LTD)

A private limited company is a legal entity in itself and not of the owner. The shareholders have ownership of the company and the directors have the responsibility of managing the company. Shares are not sold to the public and are privately held.

Advantages

• Limited Liability: Shareholders' personal assets are protected.
• More convenient to raise capital than partnerships or sole traders.
• The company looks more reputable and legitimate.

Disadvantages

• There will be additional legal and financial paperwork.
• Company accounts must be prepared and submitted.
• Making decisions can be more difficult.

One is Dyson, a private limited company.

Public Limited Company (PLC)

Shares can be sold to the public by a public limited company via a stock exchange. It is a structure frequently used in large organisations that are looking for major investments.

Advantages

• There is a significant amount of capital which can be generated through share sales.
• Greater opportunities for business expansion.
• Shareholders' liability is limited.

Disadvantages

• Strict legal and reporting requirements.
• Greater public scrutiny.
• Some control over the business may be lost by the original owners.

For example, Tesco is a public limited company.

AC 4.1 Analyse the Importance of Human Resources for Tesco.

Answer:

Human resources plays an important role in each organisation. Their job is to oversee employees and make sure that the business is working with the proper staff and the right skills to help the business reach its goals. Human resources in a large organisation like Tesco are so important in supporting the employees and the success of the business.

Recruitment and Selection

One of the major roles of the HR department is selection and recruitment. Thousands of people work for Tesco in its shops, warehouses and offices. HR makes sure to hire the right people for various positions in the company.

Tesco can attract good and reliable employees who will be able to give good service to customers by recruiting effectively. The negative outcomes of bad recruitment include high employee turnover, higher expenses and decreased productivity.

Training and Development

HR is also responsible for providing training and development opportunities. Tesco develops its employees through training programmes, building their skills and knowledge to enable them to do their job effectively.

Training is beneficial to the employee and the organisation. Employees feel more confident and perform better; Tesco increases productivity, improves its customer service and becomes more skilled. Development opportunities may also serve to educate employees for advancement in the organisation.

Employee Performance Management

Another HR responsibility is to track and control employee performance. HR collaborates with managers to establish performance goals, give feedback, and pinpoint growth opportunities.

Tesco’s performance management is effective in order to ensure high performance throughout the organisation. It also enables the company to identify and reward good work by employees, thereby boosting employees’ motivation and job satisfaction.

Employee Wellbeing and Motivation

HR has an important part to play in supporting employee wellbeing. This covers issues such as safe working practices, equality and diversity, and employee wellbeing. This covers issues such as safe working practices, equality and diversity, employee concerns and positive working relationships.

If staff members feel appreciated and supported, they are more likely to be motivated and committed to their work. This can result in reduced absenteeism, lower turnover in staff and better customer experience.

Compliance with Employment Law

Tesco will be subject to employment law with regard to health and safety, equality, working hours and employee rights, etc. The HR department assists in ensuring adherence to the legal requirements and prevents possible legal problems for the organisation.

Not following employment law may lead to fines and negative publicity for Tesco.

AC 4.2 Explain the Physical, Digital/Technological and Financial Resources Required by Tesco.

Answer:

To do any business successfully, a range of resources are required. They assist the organisation in the provision of the products and services, in fulfilling the customer needs and in accomplishing the goals of the organisation. Tesco is one of the biggest supermarket chains in the United Kingdom, which uses physical, digital and technological resources and financial resources for its day-to-day activities and growth.

Physical Resources

Physical resources are the real assets used in a business. Tesco has to use various physical resources to function effectively.

Its stores, which are spread throughout the UK and beyond, are one of the biggest physical assets. These shops offer a place to showcase and sell merchandise to customers. Tesco also has distribution centres and warehouses to store and move stock to stores.

Things need to move from suppliers to warehouses and from warehouses to stores, and these vehicles are vital to making that happen, such as delivery vans and lorries. Other equipment that Tesco need includes shelving, tills, refrigerators and freezers, security systems and office furniture. Another physical resource is stock and inventory, which is the product that is available for customers to buy.

If these physical resources were not available, then Tesco wouldn't be able to deliver products and services in an efficient manner.

Digital and Technological Resources

Tesco significantly uses technology in their working. The company employs a range of digital and technological tools to enhance its efficiency and customer service.
Tesco relies on computer systems to manage stock levels, sales information and employee records. At the cashier window, the point-of-sale systems are used to check out customers and automatically adjust the stock. The company also relies on communication systems, databases and business software for decision-making and daily business.

The technological resources of Tesco's website and mobile application are important, as they enable customers to purchase online, know the availability of all products and set up home deliveries. Cybersecurity systems are also vital in safeguarding customer and business information against potential threats.
The technologies are assisting Tesco with improving productivity, decreasing errors and giving a better customer experience.

Financial Resources

Financial resources are the means used to operate and develop the business and draw funds. Tesco needs a considerable amount of money to maintain its operations and expand its future business.

One source of finance that is important is retained profit, that is, profit that is reinvested into the business. When Tesco needs to raise more funds, it can opt to take loans from banks and other sources of finance as well. Tesco is a public limited company, and it can raise its capital by selling shares to investors.

Financial resources are used to pay employee wages, buy stock, keep stores in good condition, invest in technology, and expand and support marketing activities. Tesco's financial management makes it competitive and helps it to meet its business goals.

AC 5.1 Explain the Main Components of an Income Statement (Profit and Loss Account), a Balance Sheet and a Cash Flow Statement.

Answer:

Financial statements are crucial documents that assist businesses to comprehend their financial performance and position. They are employed by managers, investors, lenders and other stakeholders for making informed decisions. The three main financial statements are the income statement, balance sheet and cash flow statement.

Income Statement (Profit and Loss Account)

The profit and loss account, or income statement, illustrates a business's performance during a particular period. It shows the profit and loss of the business.

The key elements of an income statement are:

• Revenue (Sales): Revenue is the proceeds received by a business from the sale of its products and services. It is usually the starting point of the income statement.
• Cost of Sales: These are the actual expenses of creating or buying the products sold by the business.
• Gross Profit: Gross profit is the difference between revenue and cost of sales. It is used to indicate the level of profitability of the business, before the operating costs have been deducted.
• Operating Expenses: These are the expenses that occur on a day-to-day basis, like wages, rent, utilities, insurance and marketing costs.
• Net Profit: The profit after deducting all expenses from revenue is called the profit margin. It indicates the profit or loss of the business in the accounting period.

Balance Sheet

A balance sheet is a snapshot of the financial status of a business at a particular moment in time. It offers details regarding items owned by the enterprise as well as what it owes.

The key elements of a balance sheet are:

• Assets: Assets are resources that a business owns that are of value. Examples include cash, buildings, equipment, vehicles and stock.
  
  
• Liabilities: The obligations that the business owes to others are called liabilities. These include bank loans, payments to suppliers and other debts.
  
  
• Equity: Equity is the interest of the owner or the shareholders in a business. The amount of value that is left after liabilities are subtracted from assets.

The balance sheet is useful for stakeholders to evaluate the financial strength and stability of the organisation.

Cash Flow Statement

The cash flow statement shows the money that passes through a business over a specific time. It assists companies to keep an eye on the cash position and to make sure they have sufficient funds to cover their financial commitments.

The key elements of a cash flow statement are:

• Cash Inflows: Cash inflows are the sources of money which enter the business, like sales revenue, loan repayments, and income from investments.
• Cash Outflows: Cash outflows are the amounts the business pays out (for example, wages, rent, payments to suppliers, loan repayments).
• Net Cash Flow: Net cash flow is the amount of cash that flows in minus the amount of cash that flows out. Positive cash flow is when the cash flowing into the business exceeds the cash flowing out of the business.

AC 5.2 Explain the Elements and Purpose of Budgets.

Answer:

A budget is a forecast of income and expenses for a given business for a defined period. The significance of a budget is that it promotes the management of funds, control of expenditure and planning of activities of an organisation in the future. Regardless of the type of business, budgets are employed to make sure that resources are being used effectively and that the financial goals of the business can be met.
Purpose of Budgets

A budget's primary goal is to enable businesses to plan their finances. Forecasting the future income and expenditure of an organisation helps the managers plan how to spend the money.

Budgets can also be used to manage finances. Businesses can use the spending limits to control their spending and to determine if there are any overspending areas. This will help in avoiding unnecessary expenses and improving financial management.

Another function of budgets is to aid in decision-making. Managers can use budget information to determine if they are able to fund new projects or hire other workers, acquire equipment, or invest in technology.

Budgets are also a way of measuring performance. Actual financial results can be compared to budgeted results in order to determine any variances. This enables managers to address issues and make appropriate corrections if needed.

Moreover, budgets allow companies to accomplish their goals by making sure they have the monetary resources required to back planned activities and future development.

A budget includes the following components:

A budget comprises various parts, all of which are essential for business financial planning and tracking.

1. Income: Income is the amount of money the business is expecting to receive in the budget period. This can be from sales, investments, grants or other sources of revenue.
   
   
2. Expenditure: Expenditure is the costs that a business anticipates to incur. Examples of this are wages, rent, utilities, marketing expenses, insurance, and buying stock.
   
   
3. Fixed Costs: Fixed costs are those costs that do not typically vary as a function of business activity. Examples include rent, salaries and insurance payments.
   
   
4. Variable Costs: Variable costs are costs that fluctuate according to the volume of business. Examples are raw materials, packaging and delivery expenses.
   
   
5. Profit or Surplus: A budget will also anticipate the amount of money that the business will make or lose by subtracting expenditure from income. This assists managers in deciding whether the business is going to reach its financial objectives.