2nd Bac - Analyzing Organizations

Analyzing Organizations

What do organizations do?

It is important to understand what organizations do and how they work, as they create products and services that we all use every day. Organizations are created for two key reasons – to meet business objectives or to meet social objectives. There are many types of business objectives, but for a company to be successful it must make money and be profitable. Social objectives could be educating children by building schools and employing teachers, or providing medical help for people by creating hospitals.

Businesses in the private sector are created to make a profit for their owners or shareholders. These people invest in organizations and they agree objectives with the senior management team. When the company makes a profit, they make money. If the company makes a loss, they lose money, so they are taking a risk.

Organizations in the public sector are created for social reasons, for example, the fire and police services. The government usually pays for these organizations using taxpayers' money to provide services that everyone can use.

There are also some organizations which are registered charities, for example, the Red Cross. These organizations are part of a third sector and are called not-for-profit as making money is not an objective. Instead, they use money from donors to achieve specific social objectives.

How can we understand and analyze an organization?

Business consultants and managers use business models to create a picture of an organization in its environment – a profile. Here are two of the most important models to show you how to create an organizational profile.

The first important business model is called STEEP, which looks at five factors: sociological (social changes), technological (new technology), economic (financial changes), environmental (new ideas on ‘green’ issues for example) and political (government policy). This business analysis will help the leaders of an organization to understand their industry and to manage the business successfully.

This is an example of a STEEP analysis for a drinks manufacturer.

Organization: Drinks company                                               Date: This year
STEEP factor	Analysis of organization
Sociological	Fruit juices and bottled mineral water are more popular with adults Soft drinks still popular with children and young adults
Technological	New computerized machinery makes production faster New flavors and new sugar-free sweeteners
Economic	Financial problems in some economies as there is less money to spend on ‘luxury’ drinks
Environmental	Need to create better packaging (cans, bottles etc.) which can be re-cycled
Political	Governments in many countries like drinks companies to operate there as they bring investment and employment

The second important model you can use to analyze the organization is a SWOT analysis, which looks at the internal strengths (good points) and weaknesses (bad points), as well as the external opportunities (possible new directions) and threats (possible dangers) for an organization.

This is an example of a SWOT analysis for the same drinks manufacturer. 

Organization: Drinks company                                                Date: This year
Strengths	Weaknesses
A well-known global brand A market leader with excellent marketing strategies Popular flavors	Public image of drinks is ‘unhealthy’ Some media say sweet drinks have a bad effect on weight, health, teeth of children
Opportunities	Threats
New products: sugar free drinks, new flavors Bottled water market Sponsorship opportunities to reinforce brand, e.g. sports events	Strong global and local competition New products such as health drinks and fruit juices from competitors

Why is this analysis useful?

Once you have a profile of an organization, you can use it to change the strategy of the company so that it can meet its objectives in the future.

Are there any problems with using these models for analysis?

It is important to remember that these models are only accurate for a short time as there are many changes every day in markets and businesses. To be valuable, the senior managers or business students need to repeat the analysis frequently. 

Classwork: Scan or take picture and send me the class copied to your notebook in a PDF file to my email: engteachermiken@gmail.com

Homework: In the second half of the notebook, complete the following activities, scan and send it to my email in a PDF format by next week.

1Read the information about the organization. Then answer the question.

1.     Bluetorch is a family business that is owned and run by Olivia Henderson and her family. They have a small shop in London that produces shoes, handbags and accessories for women. Olivia's father set up the business over 50 years ago, but now the profits are decreasing. Olivia is worried about the future. What type of organisation best describes Bluetorch?

a)     Public organization

b)     Not-for-profit organization

c)     Small private company without shareholders

d)     A large private company with shareholders

2.     Write the factors in the correct box in the SWOT analysis for Bluetorch

- Interest in products from new customers in China                    

- Local customers think that the shop is old-fashioned

- Great reputation for high-quality products       

- Talented new designer with lots of ideas          

- No online ordering system 

- One small shop in an expensive area                

- Companies using synthetic materials offer cheaper alternatives

- Could increase size of workshop and employ new staff

Strengths	Weaknesses	Opportunities	Threats