Business and the Business Environment

This report examines the business environment of Sainsbury PLC, a leading UK supermarket chain. It analyzes different types of organizations, their structures and functions, and the impact of PESTLE analysis on Sainsbury's operations. The report also includes a SWOT analysis and Porter's Five Forces model to assess the competitive landscape of the UK retail supermarket industry.

BUSINESS AND BUSINESS
ENVIRONMENT

INTRODUCTION
Business environment is the actual environment that gets influenced by many internal and
external factors. There are many organisations such as private, public and voluntary
organizations that will succeed in the environment. This report briefly illustrates the gap between
large, medium, small and micro enterprises. It also describe the organizational structure, mission,
goals and relationships between the functions of the company. Finally, the impact of the Pestle
analysis on the Sainsbury PLC activity and its impact on supermarket decision making was
demonstrated. It also illustrates the various factors that influence business performance.
SECTION 1
1.Types of organisations and purpose of these firms
Business refers to the process of converting skills and materials based on customer
requests or providing services based on customer requests. Customers are very important for the
survival and prosperity of the organization. Public, private and voluntary organizations are three
main types of organisations (Chang, 2016). The public firms ruled by the government and
managed by the government for the population.
People pay state taxes and this money is used to finance most of the public sector. The
main purpose of public firms is to offer satisfactory and quality services to people. National
Health Service is publicly funded enterprise. With its development in 1948, he succeeded in
creating the most effective and comprehensive image of healthcare in the world. NHS works to
serve people and improve their health. There is no profit motive; instead the main purpose of its
existence is the right to equal care and medical services. Patients are very satisfied with NHS
services.
Private companies are managed by individuals. Sainsbury is private organizations.
Sainsbury operates more than 1,200 supermarkets with 165,000 employees worldwide (Charter,
2017). Now Sainsbury is a UK registered company that serves a variety of customers every day.
Its main purpose is to generate revenues and expand business globally. Over years, Sainsbury has
focused on creating loyal customers by serving customers at the right time.
Volunteer organisations are such as charity, business community. These
organizations are mainly non-profit and non-government organizations. Oxfam has been
identified as a volunteer organization popular in the UK. In most cases, they try to help
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certain people, such as guide dogs, Oxfam etc.. Therefore, this business is managed by
various types of organizations on behalf of citizens and their general welfare.
2.Size and scope of the organisations
NHS size and scope of business
Large companies like National Health Services are independent companies managed
privately by owners. More than 250 employees under these large organisations. Statistics show
that large companies make up only 4% of the total sector of the company, but their annual
turnover is above the remaining 96% from SMEs. Large companies are very important for
economic survival of any country which helps in sustaining their business. The big advantage of
large companies rather than small businesses is that large companies can easily raise money
through shareholders compared to small businesses (Deasy and et.al., 2016).
The difference between SMEs and large companies is mainly based on impact
fluctuations in resources in income, budget and staff. At the macro level researchers have found
that size is important for social and environmental performance.. In addition, international trade
facilitates capital transfers with minimal costs, which leads to long-term sustainable business
growth.
Size and scope of Oxfam
Oxfam is an association of 20 independent charitable organizations and comes under
small enterprise dedicated to reducing global poverty. It works as large non-profit group with a
large number of operations. The Oxfam Behind the Brands campaign evaluates ten of the biggest
policies and practices of food and beverage companies in the fields of social and economic
justice and environmental sustainability. This campaign tells consumers about what this
improvement means for poor people in developing countries who help produce the food and
drinks they consume. Oxfam spends 25% of its wages and operating expenses: Last year, the
charity spent £ 103 million, including £ 700,000 in salaries and benefits for seven senior civil
servants (Prajogo, 2016).
Size and Scope of Bellymose
. Bellymose is a micro enterprise which offer fast food. This business has only one profit motive
when serving close relative that without image or global brand. Therefore, Bellymose works for
getting revenues by selling goods.
Definition of micro, small, medium and large enterprise
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Micro- Micro companies are usually defined as small companies with nine or fewer employees
and a balance or turnover of less than a certain amount for example 2 million or 3 million
pounds. It is believed that micro-enterprises improve the country's economy. They develop
businesses only when things change in their lives and they have to generate more income.
Small businesses are easily established at low cost and with few government regulations.
Owner managers have a strong motivation to make business successful and rely on personal
efforts.
Large- In large enterprise there are more than 250 employees. They earn a huge amount of profit.
Organization structure and functions
Sainsbury is the largest supermarket in UK, with 16.5% of supermarkets in the UK (Kolk,
2016). Sainsbury's organizational structure is hierarchical, because there are a number of levels
of people and controls for each level. Each level is the upper level responsibility. Supplier
Management Strategies are very important for growing transnational organizations such as
Sainsbury. The Sainsbury PLC vision offers several unique properties that show that Sainsbury is
the best health food. It is honesty to offer quality products that create positive differences and job
opportunities (Analysis of Functional Relationship, 2019).
Marketing and production: Both functions closely connected with each other, between
these two functions which is important to improve organizational performance. To improve
organizational performance, the marketing and production functions must work together.
Marketing aids in knowing more about actual requirements of consumers by conducting market
research, by this way firm share this information with production department and this department
produces goods as per the needs of buyers. On other hand production departments works for
producing high quality goods, by this way marketing team can convince people to buy such
goods. If they do not produce quality items, then it would be difficult to sell products of the firm
to end users.
Marketing and Customer service: Customers tend to like certain salespeople when they
buy products from the company. Profits with sellers have advantages, but also benefits, for
example, when a salesperson decides or is dismissed, the company must establish a new
relationship with the customer because the employee is no longer in the company. Evidence of
seller loyalty is, if the customer feels comfortable in the company, further purchases are made
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and sales are increasing. Employees need to be trained to build this type of customer
relationship.
Finance function and marketing: both are two pillars, companies depend on their growth and
profits. Finance department allocate budget for marketing which helps in advertisement and
attracting more people towards the brand. If funds are not adequate, then it would be difficult to
manage cash flow in business. Marketing department works for generating more revenues in the
firm. This interrelationship helps in minimising issues related to financial resources in company.
TASK 2
A) Pestle analysis of retail supermarket
All retailers work in a macro environment or outside influence that determines how the
company works.
 Political: Political factors that can affect company are savings rate, exchange rate, laws
etc. It can affect profitability aspect of business. Many times government makes changes
in regulations, such kind of situations create burden on Sainsbury, As with the changing
laws firm has to make changes in its strategies and practices which influence its
performance to great extent.
 Economic: Economic factors includes elements like inflation rate, labour rate, fiscal
policy that can affect business. If government increases interest rate, then it would be
difficult for Sainsbury to trade in other countries. Furthermore, it would enhance
operational expenses of business and enterprise will not be able to invest in future
effectively.
 Social: Social factors includes elements like value, belief, thoughts and attitude of people
that can affect business. Sainsbury in the UK also focus on offering quality good to
consumers, if taste and preference get changed then it would directly affect sales of
Sainsbury which will negatively impact on business unit.
 Technological: Advancing technology has a huge impact on working of company.
Technology is an important macroeconomic variable that has influenced the development
of many Sainsbury products. Advance technologies implementation increase cost of
business but it also helps in improving quality of products as well. Hence technological
factor impact on Sainsbury in both positive and negative manner.
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 Environmental: The main social problem that threatens food retailing is environmental
protection, an important area where businesses can act socially responsible (Hamilton and
Webster, 2018). If firm fulfils its social responsibilities, then it will impact positive as it
will raise brand image of business.
 Legal: Retail Food Committee (FRC) has proposed implementing enforcement laws to
ban many common practices, such as the obligation of suppliers to change prices
negotiated retroactively or without notice.
a) SWOT and Porter’s analysis on UK retail supermarket
Strengths
 Strong economic: Sainsbury is popular for its strong financial condition which helps the
organisation in expanding its business globally significantly.
 Global presence: Sainsbury run its operations across the world which is the main strong
point of firm.
Weaknesses
 Poor investment policies: Sainsbury is unable to take correct investment decision which
hamper its profitability.
Opportunities
 Village Growth: Days pass when no branded products are used in rural areas. Currently
branded products from all categories are mandatory for daily use in the village.
Threats
 High competition is the major threats, Asda, Tesco are big competitors of the firm which
increases pressure of Sainsbury.
 Changing regulations are another threat to business.
Porter’ five forces on retail supermarket are as follows:
Threat of New Entrants
Sainsbury is the big brand and have strong market presence, it is very difficult for new
entrant to develop its brand image and influence the mind of consumers (Hair Jr and et.al., 2015).
Threat from new entrant is low because new companies do not have adequate fund to operate
business at large scale.
Suppliers’ power
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Power of supplies is quite moderate because in food retail industry there are sufficient
suppliers those who offer quality material to retail firms. If one supplier is unable to deliver
goods on time, then Sainsbury can contact to other supplier. Hence power of suppliers is
moderate.
Customer’s power
Customers are the most important stakeholder of business unit, these consumers like to
buy quality goods against the paid amount. Apart from that they always want immediate
services. If they do not receive items according to their choice, then it may influence their mind
to great extent. Lower the turnover costs and the more energy available to buyers. The famous
Sainsbury Clubcard loyalty card continues to be the most successful Sainsbury customer
retention strategy, significantly increasing Sainsbury's profits. By satisfying customer needs,
personalizing services, ensuring lower prices, better choices and a constant stream of promotions
in stores, brands like Sainsbury can control and maintain their customer base.
Threat from Substitutes
Sainsbury works under the retail industry, where many companies are offering same
products like offered by Sainsbury. These substitutes products are of same quality but consumers
have to pay less prices as compare to products of Sainsbury. In such condition these substitute
products easily influence the mind of client affect profitability of business unit. Hence company
has high threat from substitute products.
Competitor’s power
Retail industry of UK is contributing well in economic development of nation. Asda,
Tesco are some big popular companies which create high competition in the market. Sainsbury
has global brand presence and its financial condition is very strong but due to high competition it
has to face difficulties. Sometimes strategies of competitors influence the mind of buyers and
they move toward other firm. Hence power of competitors is very high and it affect the working
of business unit to great extent (Kljucnikov and et.al., 2016).
The macro environment consists of all uncontrolled external factors that affect business
performance and influence planning and decision making. You need to recognize trends and
megatrends that characterize the current macro environment. Macro environmental impact on
Sainsbury's marketing decisions. Because the macroeconomic environment factors always have
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an impact on the development and planning of companies, just as Sainsbury has influenced or
will influence macroeconomic factors in marketing decisions.
 Social environment: The social and cultural environment is very important for retailers
because it directly impacts on customer understanding and its impact on customers. This
is not only about the market demographic structure, but also about how attitudes and
opinions are formed and how they develop.
 Technological: use of advance techniques always support in quality improvement but due
to implementation of these new technologies firm’s operational cost get increased..
 Economic: The economic and competitive environment includes macroeconomic and
microeconomic conditions that affect certain market competitive structures, costs and
availability of money for investment in the stock market and new products.
 Politics and legal: The political and legal environment includes foreign powers controlled
by the state, both domestic and European, local authorities or other regulators that focus
on regulation or trade. Some of the rules and regulations developed and implemented by
the authorities under this title have a power law while others are voluntary, such as the
Code of Ethics.
CONCLUSION
Above study can be summarized many forces impact on business environment, that shape
business and product lines. In this particular task, it is identified that each business has different
objective, public firms work for offering good services whereas private work for generating
profit. There are many factors such as political, technological which affect working performance
of company. Firms have to make effective strategies so that it can deal with such factors
significantly and can met with the organisational goal. Finally, this shows how the PESTLE
model influences supermarket decisions. In conclusion, Sainsbury PLC's success and
sustainability is very dependent on the business environment.
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