Unit 1 Assignment on Business Environment – Sainsbury PLC

Introduction

Business entities in United Kingdom have been successful in their international operations. The Business Environment Assignment will focus on Sainsbury PLC and analys e its strategies and how it manages it stakeholders. The study will also review the regulations which the organizations have to follow. Different market structures will also be analysed in the business enviornment.

LO1

1.1 Different companies have different objectives in the market and in order to achieve those targets companies adopt different market strategies for that. The different organizations and their business purpose are stated below: -

Virgin Group Ltd: - Virgin group Ltd a British multinational is leading investment organization that basically operates in travel, tourism, leisure, mobile, broadband, TV, radio, music, finance and health busine ss in various continents like Asia, Europe, Africa, North America and Australia. The company is not restricted to only the above stated operations but in addition to this, the company actively contributes in airlines, rail services, cruise packages, and transportation services related to motorbikes. With business operations in various industries the purpose of Virgin Group is to excel in their services and provide satisfying services to their clients (Camillus, 2006).

Sainsbury PLC: - Sainsbury holds the second position in the league of supermarkets chain in UK. In order to ease out the operations of the company, Sainsbury is divided into Sainsbury Supermarkets, Sainsbury Convenience Stores, and Sainsbury banks. In addition to this Sainsbury also holds an interest in investing in real estate and its main purpose of operation is to provide customers with all the basic products in a convenient and affordable manner.

Mc Donald’s: - Mc Donald’s is the leading chain of hamburgers and cheeseburgers across the globe. With the active operations of the company in more than 119 countries the company's aim is to provide quality burgers to customers at affordable prices.

National Health Services (NHS): - NHS is a central tax funded service that works for providing comprehensive range of health services to the people of UK. Majority of the services offered by the NHS are free and for other services it charge nominal fees from the people (Camillus, 2006). Its main purpose is to provide quality health care services to the people of UK at convenient price.

The corner shop at my street is “Sam's Hot Dog” a food chain run by a local vendor who specializes in making different hot dogs. The main purpose of this store is to supply quality hot dogs across different corners of UK.

1.2 Describe the extent to which an organization meets the objectives of different stakeholders

Sainsbury is a public limited company and thus its ownership is divided between different shareholders of the company. The decisions taken by the management team is taken after considering the concern of all the stakeholders of the company in order to meet the business requirement in an efficient manner. The main objective behind considering the concern of every stakeholder is to make profit maximization (Hill, 2008). This is done because each stakeholder has its own share of profit in the overall profit of the company so to enhance the company's share management team is bound to consider the concerns of stakeholders.

The management team considers the various concerns by classifying the stakeholders into different categories. The management team starts with employees, as employees are one of the important stakeholders of a company it is essential to cater their needs and requirements effectively. The marketing management team has made different levels for the employees and different levels have different remuneration allocated with it. In this manner company motivates its employees to work efficiently to reach higher level and to get higher compensation. This strategy motivates employees and helps in achieving overall requirements of the organization. Better services will directly help the company in attracting more customers, enhancing profit and providing customer satisfaction. Sainsbury also possess various factors that give its employees a sense of job security (Post, 2002).

After employees the major stakeholders are customers and for surviving in the market effectively companies have to please their customers. Sainsbury has adopted a strategy to conduct market research in order to know the requirements of their customers and understand the expectations of their customers from the company, and what are the factors that can drive more customers towards the company (Hill, 2008). In addition to this Sainsbury always provide lucrative offers to its customers in order to provide them better deal over the company's competitors and to capture a major portion of the market. Suppliers are another important stakeholders of the company and company tries to establish a healthy relationship with their suppliers by providing on time payment delivery, and offering a better deal for the supply of goods and services. Government policies are also kept in consideration as it plays a crucial role in the operations of any business.

1.3 Explain the responsibilities of an organisation and strategies employed to meet them

Each organization holds a responsibility towards its staff, the society, and culture and Sainsbury is always up to fulfil its responsibilities by taking various measures towards it. Sainsbury understands that healthy food is the right of each individual and in order to fulfil this right, organization has launched more than 60 products that are cheap and provide a better option over takeaways. Sainsbury also understands its responsibility towards environment and has 110 dual fuel Lorries for transportation purpose, which is the largest no in UK. Company has also started bee cafes and planting of aromatic herbs to enhance bee population (Kotler, 2011).

In addition to these activities company actively contributes to various local charity schemes in which all the employees are eligible to nominate a charity program to support. Till date Sainsbury has donated more than 6 million pounds across various charities in UK. Sainsbury also organizes its annual games for its employees in which different sports activities are organized for the employees, this measure helps the company in motivating its employees towards physical fitness and passion towards sports. Sainsbury with the assistance of David Beckham and Ellie Simmonds have invited over 400 schools of UK to order sports equipment in which Sainsbury will give a significant amount for the sport aids to these schools (Idowu, 2008). In addition to these activities the organization is active in various other measures that organization considers its responsibility and is consistently contributing to the society.

LO2

2.1 Explain how economic systems attempt to allocate resources effectively

Economic systems play a crucial role in the smooth execution of operations of any organization. There are various economic system according to which an organization is requiring to frame its operational strategies. The first is command economy in which government frames guidelines for organizations as to whom they have to deal with, what they have to manufacture or supply, and who should be the end consumer for the manufactured product. Command economy is generally found in communist countries where organizations are bound to act according to the governmental policies. Sainsbury operates in UK where government does not have such restrictions on organizations (Gregory, 2013).

Another economic system is free market system in which government intervention is minimal and most of the resources are categorized under private firms.  Price regulation is in the hands of this private organization and it depends on the demand in the market. Any organization can contribute in the market according to the capital and capabilities of the organization.

Next is the mixed economy market in which both government and private organizations play a vital role in driving the market of any place. A major decision taking power rests in the hands of private organizations but government makes some regulations in order to monitor sustainable execution of business operations in the market (Eckstein, 2001). This sort of market economy keeps the concern of both consumer and supplier and maintains synchronization in the market. Sainsbury operates in a mixed economy market and it is one of the contributing reasons for the leading position of Sainsbury in the market.

Last is Transition economy market. Transition economy can be defined as a market in which a constant transformation is done from command market to free market economy. In transition economies the issues of rising unemployment is very high as private firms tend to employ less people then required and force the existing human resource capital to work beyond their limits (Gregory, 2013).

2.2 Assess the impact of fiscal and monetary policy on business organisations and their activities

Fiscal and Monetary policies are crucial factors for driving the business operations of any organization. Sainsbury's operations are also affected by the fiscal and monetary policies of UK. Expansion of Fiscal policies may result in enhanced interest rate and reduced investment. The net result will help in the overall growth of the income of Sainsbury PLC. But, in the case of consistent lower investment and capital stock then it may result in lower future incomes (Zoli, 2005). Sainsbury must consider these fiscal policies of government before investing further in the market and efficient analysis of these fiscal policies will help in enhancing the profit of the company.

On the other hand monetary policies are a blunt policy instrument, which affects all the sectors of economy in different manner. Amendments like lower interest rate will tend to increase the spending of fixed capital that changes the current equilibrium of the nation. If exchange rate is reduced then Sainsbury may face negative results as the company will get less amount for the same product in that condition Sainsbury mar require to change the current prices of products. But if exchange rate is hiked then Sainsbury may have greater profits from offshore for its products (Monti, 2003). Reduced taxes will again reduce the operational cost of the company and will help in enhancing the revenue of the company and contrary hiked taxes will reduce its revenue and will increase its operational cost. The management team must analyse these policies on a regular basis and must do the required changes in the business operations in order to thrive and maintain its position in the market.

2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization

Sainsbury has been able to maintain its leading position in the market. But, increasing competition in the market constantly affects its business operations in the market. It is essential for the management team of Sainsbury to analyse the measures opted by its competitors to frame its operational strategies in order to take lead over the competitors. Sainsbury's biggest competitors are Tesco and Morrison in UK. The activities of Tesco and Morrison greatly affects the sales of Sainsbury as if Tesco reduced the price of its products then customers will quickly changes their preference because Tesco also holds a sound brand name in the market. Therefore, it is essential for Sainsbury to respond quickly and offer their customers a better deal or offer over Tesco. Analysing their marketing strategies is also crucial as marketing planning an important role in driving the sales of any company. Monitoring marketing campaigns of Tesco and Morrison will help the company in analysing the current trend of the market and what different they can use to attract target customers (Camillus, 2006). So far Sainsbury has been able to increase its market share in the last 12 weeks, and this is because of effective analysis of strategies of its competitors by the management team of Sainsbury.

Regulatory mechanisms are other factors that also affect the operational efficiency of Sainsbury and management team must respond to these factors quickly in order to maintain the smooth execution of business operations. Factors like conflict between employees, strikes, malfunctioning of any system, hazards, etc. affects the working of organization and appropriate measures must be adopted in order to overcome these factors (Hill, 2008).

LO3

3.1 Explain how market structures determine the pricing and output decisions of Sainsbury PLC UK.

To land at the market price of a product and the quantity to be produced by an organisation is a critical question and is decided on the basis of the market structures. The common market structures are oligopoly, monopoly and perfect competition.

Perfect Market Structure: Perfect Market Structure is an ideal market structure where many companies are operational in a market segment. In such an environment there are many sellers and buyers for a product. Thus the demand and supply patterns are uniform. Policies and strategies of an individual company does not affect the market structure.

Monopoly Market Structure: Monopoly for a product occurs when the supply of a product is controlled by limited number of companies. These companies control the supply and price pattern of the product. As a result of no competition in the market, the price of the products may sometime be out of proportion or reach of the common people. The profit margins are generally high in a monopoly market structure (Ankerl, 1978).

Oligopoly Market Structure: In Oligopoly, a product of similar kind is sold by several organizations. For determining the pricing of a product, two factors are considered, first is the price of the product at which the products are sold by the top companies for the product and second is the demand patterns (Vives, 1999) For capturing the market share the companies keep the price of product below the price of top companies. This strategy allows the new entrants to make a space in the market.

Sainsbury PLC, a leading organization in the Super market division is an example of a Perfect Market Structure. Sainsbury PLC reviews the market demand and decides on the volume of product to be sold. The volume is such that the Sainsbury PLC makes profit. The two factors which Sainsbury PLC considers while deciding the price of product are the price offered by the competitors and the price which the customers are willing to pay for the product. Keeping a price of a product which is out of reach of normal customers will certainly reduce the sales of the product.

3.2 Illustrate how market forces shape Sainsbury PLC UK responses using a range of examples.

Different market forces impact the large organizations like Sainsbury and shape its responses. The major forces basically comprises of actions of the potential customers, economic system of scale, pricing and output decisions and supply & demand in the market. Perhaps, the actions of consumers are the deciding factor of any business’ success. Since the taste and buying patterns of the customers keep on changing, Sainsbury needs to keep a check on the product price change.  With the awareness of the customers and growing concern for the quality products, the company must increase the quality and provide a wider choice to the customers.

Further, economies of scale are directly linked to the large production of the goods. If Sainsbury plans to generate large quantity of goods, it has to consider this parameter thoroughly (Scaner, et al., 2009). Good and stable economies of scale can support the organization in generating large quantities of products. In addition, it is the demand of a product on which supply depends which means demand is directly proportional to the supply.  If a particular product like frozen food items is in demand by the customers, Sainsbury will have to meet this demand by supplying adequate related products. On the other hand, the organization takes pricing and output decisions keeping in mind the sales expectation, profit expectation and demand of the products.  So, it is clear to see that the decisions and actions of Sainsbury are determined by the active market forces.

3.3 Judge how the business and cultural environments shape the behaviour of Sainsbury PLC UK

The behaviour of an organization is shaped by cultural and business environments. To discuss and understand these determining factors, PESTEL analysis must be done. The abbreviation stands for Political, Economic, Social, Technological, Ecological and Legal factors. The stable political situation makes the organization drafts better policies and take decisions. Since EU makes reasonable legislations and brings in lenient regulations, Sainsbury remains in cordial association with the political factors. The economic factors on the other hand, refer to the GDP, inflation rate and employment rate (Denison & Daniel, 1990). The organization complies with all the economic policies of the government and functions smoothly.

To add on, the social factors greatly affect the organization as it includes the customer’s expectations, demands and tastes. Any changes in the demand and taste of the customer have a direct impact on the supply of the company. Next is the technological factor which indicates the rapid change in the technology. To remain competitive in the market and produce the latest range of products, Sainsbury has to remain updated with the cutting edge technology (Scaner, et al., 2009). The ecological factors refer to the issues that relate to the environment while legal factors make the organization to abide by all the laws drafted by the EU. With this, various other cultural factors are also to be kept in mind by Sainsbury in order to maintain a strong position in the UK market.

LO4

4.1 Discuss the significance of international trade to Sainsbury PLC UK.

International trade in the recent decades has flourished to the maximum extent. The transfer of goods and capital among various nations of the world has rapidly increased with the increase in globalization. A business organization like Sainsbury enjoys many benefits of international trade as it can now operate in other locations or other countries without any trade barriers. This grocery store can open its stores in new locations legitimately. Sainsbury has already become a global business operating unit extending its services in different location especially the EU member states where it operates freely.  In fact, it is now been able to outsource its business operations and activities in other nations in order to elevate the product quality and lower down the cost (Dudovskiy, 2013). With this, the company is able to provide a better and wider product choice to its customers by importing the products that are not produced locally.

Importance of international trade: If there is no international trade in the United Kingdom then the revenues of Sainsbury will get severely affected. The organization will not be able to sell its grocery products globally and even economies of scale will become useless. To add on, the company will get the advantages of competitive advantage theory which emphasizes on the benefit of one country by specification and other through cost reduction. Since Sainsbury has opened its stores in new locations due to the presence of international trade, it has considerably increased the employment opportunities for the locals. This simply means that with its own benefits, the organization is able to benefit the entire society. Also, it is only due to international trade that Sainsbury is able to utilize all the available resources to its maximum in turn, contributing to the development of the organization as a whole.

4.2 Analyse the impact of global factors on Sainsbury PLC UK.

There are different global factors that tend to affect an organization in a great way. These factors include elevating multiculturalism levels, increase in the international trade and interdependency of national economies. These factors can be comprehended through PESTEL analysis i.e. political, economic, social, technological, ecological and legal factors. Political factors indicate the global trade initiatives, level of global political stability and tariffs between the UK and other countries. If the global tariff rate is higher, Sainsbury will face difficulty in competing with the companies of that specific nation. Further, the economic factors include global economic crisis, stock market fluctuations, increase in the outsourcing level and impact of globalization. On the other hand, changes in the buying pattern of the customer and greater concern of the society are counted under social factors. A large department supermarket like Sainsbury has to always analyse the tastes of the customers and offer products accordingly. It must modify its products supply keeping in mind the changing buying patterns of the customers.

Even the technological changes also impact the business. Since the technology is developing day by day, Sainsbury has to keep itself updated with it. Utilization of the latest technology is the only tool to compete with the competitors in this cutthroat market competition. There is regular emergence of better communication technologies and industry-specific technological breakthrough when it comes to the global factor technology (McCormick, 2007).   The ecological factors impact the business due to global warming, increase in the pollution and air and increasing sensitivity towards ‘green’. Here, Sainsbury has to follow all the environmental laws and confirm environmental concern. Lastly, legal factors make the organization abide by all the laws and rules drafted by the European Union. In case of non-obedience of the government laws, the organization will have to pay heavy penalty.

4.3  Evaluate the impact of policies of the European Union on Sainsbury PLC UK.

Since Sainsbury has the UK membership of the EU, it is directly affected by the EU’s policies and legislations. To start with, the EU Liberalization Policy in 1993 required all the businesses in the UK and all the member states of EU not to impose any tax on the goods being imported between the EU nations. In addition, according to the EU policies, those businesses whose combined turnover is more than the specific threshold of sales specified by EU and are that aim at merging needs to have approval from the EU. Other policies that impact the organizations like Sainsbury are related to cartels, state aid and others. The inflation policy guides Sainsbury to keep its prices within the reach of the customers. Considering this, Sainsbury has given importance to the Fair Trade under which it sells high quality of all its products within the reasonable prices.

EU policies: Education and training policy of the EU gives an opportunity to the people to get training and development in the government funded programs while the employment policy focuses on improving the employment rate. The policy aims at strengthening the areas that are under acute unemployment conditions and supporting locals to earn a standard of living. With more and more locations of Sainsbury, local people get an opportunity to work. EU, in brief set the rules of the game which means it regulates the entire import and export within and outside the UK (Euromove, 2014). It has the power to anytime ban the products that are being imported in the country or are exported outside. This directly affects the organization’s profits. Sainsbury has to consider all the policies else, it will be registered under the violation of the agreement of the EU member nations. Till date, this popular department supermarket has avoided by all the policies and the same is expected from it in the future.

Conclusion

International trade has presented business organization vast number of opportunities to grow. Most influential factors affecting the strategies of organizations include fiscal and monetary policies. Sainsbury PLC has followed the business regulations and EU laws and has been successful in meeting the stakeholders expectation

References

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