TASK 1
P 1.1 Explain briefly the following types of organizations and their purposes:
- a) Virgin Group LTD
Virgin Groups ltd is a private organization which was formed by Richard Branson in the year 1968. The company mostly deals in travel, music, mobile telephony, leisure, health and care, etc. Being a private organization, the main aim of the company is to maximize its profits. The main vision of Virgin groups is to create happy and fulfilling faces and making contribution to attain sustainable lifestyle. The company also make sure that its entire stakeholder’s satisfaction level is maintained.
- b) Sainsbury PLC (Public)
Sainsbury is the second largest chain of supermarkets in UK. With over 145 years of business existence, the company has already proved its point in terms of sustainability. The company was formed by John James Sainsbury in the year 1869. The company does its retail business mostly in grocery and general merchandise. The main vision of the company is to be the most trusted retailer in the world where both workers and customers love to work and shop respectively. The core values of the company defines the strategy the company follows in order to have long term growth. The core values are:
- Developing new business
- Offering great food
- Providing complimentary services to its customers.
- Growing by increasing number of supermarkets and stores.
- Launching new and compelling clothes and general merchandise.
- c) MC Donald’s
McDonalds’ corporations are a public organization which has the largest chain of restaurants for hamburgers. The company was initially opened in partnership by Richard and Maurice McDonalds in the year 1940. The company operates in more than 120 countries world-wide by mostly involving in the business of Franchisee. The main purpose of the company is to make proper use of people, processes and practice to deliver high quality products with high nutritional value, to make good contacts with all its stakeholders such as employees, customers, franchisees and suppliers, to form a good community and to work in and environmental friendly way to minimize the environmental concerns.
- d) National Health services (NHS) England
National Health Services England is a governmental funded organization which deals in providing health and social care to the people of England. The company’s main motive is to provide proper medical care to the people who need it without asking for money. Any person who has an NHS number can make use of this free medical and health facility provided by NHS.
- e) A corner shop near where you live
A shop is run by a single person who is known as the entrepreneur. The main motive of an entrepreneur is to gain maximum profits. The vision of the shopkeeper is to be the best in the local market among other competitors. Quality Management in business vital for the product as it plays an important role in the success of shops as other factors like marketing and communication has limited scope when it comes to running business at low scale.
P1.2 Considering Sainsbury PLC, describe the extent to which it meets the objectives of its different stakeholders.
Stakeholders are people or groups which are directly or indirectly affected with the day to day operations and results of the company. It is not necessary that stakeholders are involved with the functioning of the company. Some of the important stakeholders associated with Sainsbury are employee, customers, suppliers, investors, government, social communities, etc. Sainsbury first conduct various research, surveys and feedback forms to take the opinion of its stakeholders. According to the company stakeholder engagement is important as it increases the feeling of being responsible towards the organization and motivates them to perform their work better (Whysall, 2004).
Secondly, the company analyse the information and maps stakeholder concerns with the amount of impact the concerns will have on business. The prioritization is segmented into 9 different segments:
Figure 1: Prioritizing stakeholder concerns with impact of concerns on business
Data Interpretation
Sainsbury PLC first collects the feedback and concerns of its various stakeholders through research, surveys and meetings. The company then plot the above graph based on the level of concerns and the impact that those concerns have on business. The red block shows areas of concerns and requires quick action from business followed by yellow blocks and then the green ones which can are given least importance. All these concerns are put into the CR strategy of Sainsbury business strategy.
The company laid high level of emphasis on Corporate Social Responsibilities (CSR) and sustainability (Blomqvist, 2004). The company interacts with its employees and customers on regular basis to take their feedback and conducts surveys twice in a year mainly focusing on corporate responsibility. The company also conduct daily meetings between supervisors of each store and also conduct an annual survey which is known as “Talkback” to take feedback from its employees. The company also engages government and non-governmental organizations to know their concerns and act accordingly.
Sainsbury is member of various social and environmental groups such as the Ethical Trading Initiative, Business in the Community, the Roundtable on Sustainable Palm Oil and the World Wildlife Fund Forest, etc. Sainsbury focuses hard on the five values discussed in the previous section. Based on the five core values of the company along with CR activities the governance structure of Sainsbury can be depicted from the below figure:
Figure 2: CR and governance structure of Sainsbury PLC
P1.3 Considering Sainsbury PLC, explain its various responsibilities as an organisation and the strategies it employs to meet them.
Some of the important responsibilities of Sainsbury are discussed below:
Responsibility towards customer: The main responsibility of any company including Sainsbury is to make sure that customer service met with satisfaction. The company make sure that new and latest clothes are sold which makes customer happy, the quality of food and nutrition value should be high and complimentary services should be provided to customers to make them feel special and respectful.
Responsibility towards employees: Sainsbury is one of the major employers in UK as it is considered to be among the top four giants in retail sector. The company launched a new programme in the year 2010 with the name “You Can”. The company also hire ex-offenders and people who are unemployed for years through Job Centre Plus and London Employer Accord. The company organizes various training and development session to nurture the skill of its employees and make sure that the company has diversified workforce without any sort of discrimination and are provided good wages and better work conditions.
Responsibility towards environment: The Company also focuses hard to make sure that environmental concerns are minimized because of daily operations of the company. The company doesn’t support use of plastic bags as dumping of plastic bags is highly harmful for environment and many species.
Responsibility towards suppliers: The Company make sure that proper lead time I given to all the suppliers so that the demand of the company is met in time. The suppliers are also engaged in discussion related to Cr activities and sustainability of the company. As per the future plan, the company is contacting dairy farmers directly so that fresh daily product can be bought and sold to the customers who will be beneficial to the farmers, company as well as customers.
Free copy of Unit 4 Marketing Principles Assignment
TASK 2
P 2.1 Giving relevant examples, briefly explain how different economic systems such as: command, free enterprise, mixed and transitional systems attempt to allocate resources effectively
One of the key economic decisions a country has to take on resource allocation is choosing the economic systems. The various types of economic systems are: pure command, free enterprise, mixed and transitional systems. Each of them is discussed below:
Pure command economy refers to economy where all the resources are owned or controlled by the government of that country. Some of the benefits of command economies are wise utilization of scarce resources. Since, the government main motive is welfare of citizens, under command economy through managing resources methods and maximum social benefits are attained (McNeill, 1984).
Figure 3: Command economies
Free enterprise: Economies where allocation of resource are managed by the free flow of market forces i.e. interaction of producers and consumers is known as Free enterprise economy. In this type of economic system, most of the businesses are owned by Individuals without much intervention from the government. USA and Singapore enjoys free enterprises while European countries generally have strict regulations from the government which can intervene in private transaction (Sheshinski, 2007).
Figure 4: Free market enterprise
From the figure, it can be seen that under free market enterprise, what to produce is determined by the consumers, while how much to produce is determined by the producers and the prices are determined by the flow of demand and supply.
Mixed economies: Mixed economies as the name suggests is the mixture of the above two approaches where both free enterprise economy and command economy are followed. In a country like UK, where grocery sector is one of the primary sectors, it is handled by the market forces and resource allocations through free economies. However, services for the welfare of people are generally handled by the government such as police, army, etc. Most of the countries in today’s time follow mixed economy.
Figure 5: Mixed economies
As can be seen from above figure, what to produce, how to produce and for whom to produce is partially determined by the producer and consumer but also governed by the government. In mixed economies government make sure the producers does not take unnecessary advantage to seek profit and consumers do not forces the producer to sell product at much cheaper rates.
Transitional economies: Economies which are undergoing a change from pure command economies to free enterprise economies are termed as transitional economies. Since, communalism ended long time back, it is important to convert communal type of economies into free or mixed economies. However, this transition is characterized by lots of issues such as unemployment, inflation, lack of managing communications and entrepreneur skills, corruption, etc.
P2.2 Considering Sainsbury PLC UK, assess the impact of fiscal and monetary policy on their activities
Fiscal Policy: Fiscal policy refers to the policy adopted by the government to make sure full employment, price stability and economic growth. Some of the key measures taken by government under fiscal policy are taxation system, acquisitions of goods and services, changes in tax rate, etc. Some of impact of Fiscal policy on Sainsbury is that there is an increase in the VAT (value added tax) and income tax, which reduces the purchasing power of the consumer. The consumer buys less and hence Sainsbury has to order fewer goods from their suppliers. The main impact is that the company has to incur losses and even has to reduce their workforce to cut down expenditure and increase profit margin. As a result, employment is reduced and lesser job opportunities are offered. Even to cut down on existing workforce, the Company even has to terminate its employees, which creates more unemployment.
Also, as mentioned above, fiscal policy also involves change in the government spending. An increase in the government spending in different sector will reduces the Sales volume of Sainsbury. On the other hand, a reduction in government spending increases the demand for private sector and the sales of Sainsbury will increase.
Monetary Policy: Monetary policies are policies adopted by the government to bring stability in the economy through increase or decrease of interest rates so as to control the supply of money in the economy. Some of the main advantage of monetary policy is that reduction in the interest rate will help them to borrow at lower prices, thus helps to increase the spending of the Company like Sainsbury on its business activities. On the other hand, an increase in the supply of money results in inflation which reduces the demand of Sainsbury to purchase from its suppliers and hence reduces its profit margin (Ellis, 2013).
Monetary policy also affects the reserve requirement. High reserve requirement means high interest rate which invites the consumers to invest more and spend less, thus consumers reduces their purchasing from the stores, thus reducing their profit margin. Similarly, low reserve requirement means low interest rate which pushes the consumer to spend more and hence increase the profit margin of Sainsbury.
P 2.3 Explain the impact of competitions policy and other regulatory mechanisms on the activities of Sainsbury PLC UK.
In the year 2003, Sainsbury showed the highest growth rate of 4.9% and the value of market share also grew by 16.5%. It was the large among all the four competitors i.e. Tesco whose market share value dropped to 30.2% from 30.9%, ASD whose value dropped to 17.1% from 17.5% and Morison’s market share dropped from 11.5% to 11.3%. Sainsbury achievement last year has been mostly because of the strong growth rate. Waitrose Managing Director commented on the progress of Sainsbury by mentioning that most of the new stores are coming up from Sainsbury as compared to rest of the competitors.
Competition plays an important role in determining the price of the commodity. Companies in order to succeed, lower their prices, increase the efficiency of their services which is highly beneficial to the customers and therefore, the end consumer is the one who gains maximum because of competition policies and other regulatory mechanism. Sainsbury faces tough challenges from other three supermarket giants in UK. According to the Competition Act which was signed in 1998, a competition commission keeps the activities perform by various organizations under check. Sainsbury was caught by the competition commission firstly because the company lack proper structuring of grocery markets. Secondly, the company was using power centres to drive their market which could lead to monopoly of Sainsbury. Thus, Sainsbury was kept under check because of the functioning of this Act. On similar basis another act known as the Enterprise Act also played an important role in regulating the functioning of retail companies’ including Sainsbury. The act included new rules and regulations in relation to merger and collaboration of two companies (Rodger, 2011).
Task 3
P3.1 Explain how market structures determine the pricing and output decisions of Sainsbury PLC UK.
Market structure can be classified into four main categories: Perfect competition, monopoly, monopolistic competition and oligopoly.
The big four companies of the UK together forms Oligopoly (Akehurst, 1984). 70% of the total grocery market in UK is covered by the Big Four companies of UK i.e. Sainsbury, Tesco, ASDA and Morrison’s. The major advantage of oligopoly is that the price is controlled and other non-price activities like CR activities are also kept in check because of high competition between the companies. However, the disadvantage of such a structure is that it is not suitable for other small players to enter into the market.
Being Oligopoly market structure, UK retail market follows kinked demand curve which is explained below:
Figure 6: Kinked demand curve to determine price
Data Interpretation – The above demand curve shows the market structure in UK retail business to determine the prices. This type of kinked demand curve is associated with Oligopoly type of market structure. If Sainsbury increase the price of its commodity, there will be large substitution effect and the consumer will look to purchase from the other competitors in the market. On the other hand, a reduction in the prices will lead to smaller change in demand as the other competitors will also alter their prices and hence the demand will not increase proportionate to the change in prices.
Thus, in this type of market structure, Sainsbury looks to provide other non-financial activities like excellent customer services, formulating better CR activities, etc. to make sure they can have competitive advantage over its rivals.
P 3.2 Illustrate how market forces shape Sainsbury PLC UK responses using a range of examples.
The competition between the grocery markets of UK can be explained with the help of Porter’s five force framework (Yan, 2004).
The five forces of Porter’s analysis are:
Industry Rivalry: The major effect on Sainsbury pricing and output decision making is because of the high competition the company faces. The company once used to be the top supermarket stores in UK has slipped to number three position because of high quality products and better services provided by rival companies. However, the year 2013 was better for Sainsbury. The high competition forces the companies to introduce new concepts and apply new business strategies to attract more customers, lower price of commodities, focus on providing high level of service to the customers so as to retain existing customers and also work hard on resolving stakeholders concerns on social and environmental issues.
Bargaining Power of Suppliers: Since, all the four companies operate in the same sector, it is important for the company to look for new alternatives for receiving raw material. Sainsbury went ahead and contacted farmers directly for dairy product help the company to purchase raw material or finished product at very cheap prices. All the four companies mostly share same suppliers and hence it is important to make sure that suppliers are satisfied.
Bargaining power of customers: The ever increasing customer demands followed by change in market trends, forces the company to formulate new ideas and strategies to hold competitive advantage. Sainsbury provide large variety of clothing and introduce new collection from time to time to make sure customer satisfaction is met.
Threat of New Entrant: Since it is tough for new and small players to enter into the market, Sainsbury sales are not affected because of emergence of any new competitor.
Threat of Substitute: Sainsbury has tackled this threat by expanding its business into multiple things. All the products and their substitutes are sold by Sainsbury and are available at their stores. Thus, people have complete freedom to buy the product they like. Hence, this problem is overcome by expansion of business by Sainsbury over the years.
P 3.3 Judge how the business and cultural environments shape the behaviour of Sainsbury PLC UK.
Business environment deals with the various political, economic, legal factors associated with business which can affect the functioning of an organization. On the other hand, cultural environment means the social life and culture that prevails in a particular region which decided the consumer tastes and preferences and based on which the organization has to decide what product to sell in the market. These two factors are analyzed with help of PESTEL analysis on Sainsbury PLC.
Political Factors: The main political factors that affect behaviour of Sainsbury are the continuous intervention of government during economies of scale. The involvement of government to decide what product and what service to provide plays an important role in changing the behaviour of the company.
Economic Factors: As discussed in the previous section, the changes in the monetary policies i.e. carrying interest rates, taxation, etc. or fiscal policies in the country also plays an important role in deciding the actions to be taken by the company. During high interest rates, the company limits its purchase and also control its growth as investors ask for high interest.
Social and Cultural Factors: Sainsbury business is driven by changes to customer’s taste and preferences. The company takes regular feedback regarding its product and service and based on the feedback the company formulate new business strategies. The company also employees diversified people so that interaction with customers can be done smoothly. The company also does charity, arrange social events, sponsor sports and also works for the welfare of animals.
Technological Factors: Sainsbury make full use of the new and emerging technology and incorporate it in its day to day business. From online shopping to using barcodes on each product and use of computer software to make new designs clearly proves that the company pays high importance to technology. The company also uses data analytical tools to analyse their data and storing valuable and confidential data’s. The company used new methods of communication to interact with various stakeholders and uses virtual rooms to conduct team meetings. Communication through e-mails has become one of the common features of the company.
Environmental Factor: As discussed in the previous section, Sainsbury lays huge emphasis to the environmental concerns raised by various stakeholders and tries its best to minimize these concerns. Global warming and climatic changes are big concerns in most of the countries. Therefore, the companies make sure that their actions and operations should not contribute to increase in release of these harmful gases. The functioning of Sainsbury is not only efficient but eco-friendly methods are used within the company.
Legal Factors: The Company tries it best not to violate any law or legal rules laid down in the country. Sainsbury make sure that there is no discrimination done on the workforce and everyone is treated equally and given equal opportunity to work.
Task 4
P 4.1 Discuss the significance of international trade to Sainsbury PLC UK.
Sainsbury imports raw material from various parts of the world. The company continues to search for new way of supply so as to meet the ever increasing customer demands. The company make sure that all its suppliers are satisfied with the company and try its best to build healthy relationship with its suppliers.
Sainsbury was the first country to start fair-trade business in the year 1996. Fair-trade does not means doing charity. The company ensures that farmers and producers of developing countries receive adequate value for the product that is supplied to the company.
Under Fair-trade, Sainsbury has started an educational program to teach the workers and farmers in South Africa and Kenya to develop skills to tackle challenging social issues concerning those places. The company also teaches the people about fair price system and raise awareness about the cost of various products so that the people can sell the product at correct price and are not exploited by other profit making company who tries to make unethical benefits from the ignorance of these people (Witkowski, 2005).
The company also teaches the customers and encourage them to buy fair-trade products. The company is fully aware of the Bull Whip Effect and understand the huge impact on producers because of even a small fluctuation in the price of commodities.
P 4.2 Analyse the impact of global factors on Sainsbury PLC UK
Some of the important global factors which impact Sainsbury PLC are (Dupuis, 1996):
Global Leaders: The Company fails to compete with global leaders and business is widely affected because of that. For example, Sony is one of the leading companies in the field of electronic products. Therefore, demand for electronic products at Sainsbury is affected hugely because of this.
Global Marketing Strategies: Global companies use the same product and same ad campaign in many countries which is a very cost efficient way to marketing. This helps global players to set low prices for their product and affects the market of Sainsbury greatly.
Ease of Transport: One of the most striking factors is the rapid changes in the transport facilities. An individual can order a product from any company and can receive the product the next day. Transport has become so easy that many people do not compare products between two stores in their locality of town but the people compare the products at globally. Online shopping has also contributed immensely to expand the market size and hence Sainsbury loses its customer because of ease in the transportation facilities’.
Conclusion
Thus, it can be concluded that Sainsbury has been a successful company in UK. The long history of the company proves the right approach of the company to attain sustain. The company is challenged by three big companies and hence the company has to formulate new strategies to make sure that customer satisfaction is taken care off. However, the company lacks growth rate globally. Though the company showed maximum growth within UK last year as compared to its other rival companies, Sainsbury still needs to set its market in other parts of the world. With 145 years in business experience and expert market players working within the company, it provides Sainsbury with the right platform to set its foot on global expansion to increase its growth rate manifolds.
References
Akehurst, G. 1984. ‘Checkout’: The Analysis of Oligopolistic Behaviour in the UK Grocery Retail Market. Service Industries Journal, 4(2), 189-242. Blomqvist, K. H., & Posner, S. 2004. Three strategies for integrating CSR with brand marketing. Market Leader, 33-6. Bulmer, S., & Lequesne, C. (Eds.). 2013. The member states of the European Union. Oxford University Press. Dupuis, M., & Prime, N. 1996. Business distance and global retailing: a model for analysis of key success/failure factors. International Journal of Retail & Distribution Management, 24(11), 30-38. Ellis, C. T. 2013. Investigating the behaviour of individual UK prices, and gauging the implications thereof for monetary policy (Doctoral dissertation, Middlesex University). McNeill, W. 1984. The pursuit of power: Technology, armed force, and society since AD 1000. Rodger, B. J., & MacCulloch, A. 2011. Competition Law and Policy in the EC and UK. Routledge.for more HND Business Environment free Assignment, explore our unit section or order us
Sainsbury, D., & Morissens, A. 2002. European Anti-Poverty Policies in the 1990s: Toward a Common Safety Net?
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