Retail Business Environment in the UK

This assignment examines the complex business environment of the UK retail sector. It delves into key challenges such as intense competition, evolving consumer preferences, government regulations, and the impact of digitalization. The analysis also highlights opportunities for growth and success in this dynamic market, emphasizing the need for strategic adaptation and stakeholder satisfaction.

BUSINESS AND BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1) Difference between distinct kinds of organisations with their business purpose and supply. 1
2) Determining the size and scope of different organisations.....................................................2
3) Different structures of organisation and the way they relate with mission and objectives of
business........................................................................................................................................4
PART 2............................................................................................................................................6
a) Application of PESTLE model to examine the way macro environment is impacting the UK
retail sector...................................................................................................................................6
b) Application of SWOT analysis and Porter’s five forces model to Marks and Spencer..........8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Environment in which businesses are operating today is highly dynamic and thus, to
remain competitive and able to deal with changes effectually, it is important for organisations to
adopt suitable strategies. For companies to stay in market with gaining success and growth,
giving due consideration to the environment in which they are operating is of utmost significance
(Ahmed and Alam, 2014). In the present report, there will be discussion on different types of
organisations with their scope, size, structure and functions. Also, the interrelationship of
organisational functions with mission and objectives of business will be highlighted. Further,
with reference to Marks and Spencer which is a British multinational retailer, based in the UK,
application of PESTLE, SWOT and Porter’s Five Forces Model will be given the assess the way
external environment of impacting on UK retail industry and influencing decision of company.
PART 1
1) Difference between distinct kinds of organisations with their business purpose and supply
Differentiating profit, not for profit and non-governmental organisations (NGOs)
Profit organisations are mainly firms having purpose to offer goods and services to
customers with an aim to earn higher profits and maximise the wealth of shareholders like John
Lewis Partnership, Bestway Group and Virgin Atlantic. These firms are involved in certain
business activities which are legal as they comply with all regulatory norms and policies. On the
other hand, not for profit organisations like AdviceUK, The Facilities Society and Bristol Energy
are those firms which operate without having any aim regarding earning profits for owners or
shareholders (Fritz, 2018). Instead, they aspire to earn the income and re-utilize it for attaining
goal of organisation in the local community or globally. Major difference in between both these
kinds of organisations can be calculated through the measurement of success. Apart from that,
there are also non-governmental organisation, mainly known as non-profit firms which are
independent of government and governmental associations on international level which means
there are not restrictions imposed by regulatory authorities on them (Karns, 2018). Some of the
well-known non-governmental organisations in the UK are Children, Abbey National Charitable
Trust, Oxfam, Cancer Research and British Red Cross. These firms operate their business to
serve some social and political purpose and mainly funded by private donations, governments or
international organisations.
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Different purposes of business and supply of goods and services
Major purpose of profit organisations like John Lewis Partnership, Bestway Group and
Virgin Atlantic is to increase their profits from higher sale of goods and services which are
developed and sold in such a way that is desired by the customers and ultimately lead to generate
higher revenues. These firms mainly operate as sole proprietors, partnership or company. So,
they get started with the investment made by sole proprietor, partner or the shareholders of
particular concern as well as managed by them only (Xu and et.al., 2016). Whereas, for not for
profit firms like AdviceUK, The Facilities Society and Bristol Energy, main purpose behind
running business is to raise money so that needy societies can be served and their causes can be
advanced. Profit which they earn remain in the business that is further used to sustain their
mission. Their major purpose to perform business is for the welfare of society and members by
generating revenues from the sources like donations, fees and contributions and supplying goods
and services to people to fulfil their unsatisfied needs. Ownership which non-profit organisations
possess can be referred as the association of persons in the form of trusts and club societies as
well as their management is done through governing bodies, committees or trustees
(Kandampully, 2011). On the contrary, main purpose of NGOs is to promote and take care of a
specific cause. These firms mainly operate with an aim to increase awareness regarding some
like for serious diseases along with acceptance and knowledge through different ways such as by
organising campaigns, press work and activist event.
2) Determining the size and scope of different organisations
Differentiating micro, small, medium-size and large enterprises
Micro enterprises are basically the small organisations with very less number of
employees working there with minimum capital. These enterprises operate with less than 10
people and business gets started with a very small amount of capital. They are generally vast in
number who start their business due to necessity and add value to the economy by generating and
rising income with reducing the overall cost of business. They mainly produce products and
services for the people residing in local areas in the form of local farms or food staples from a
small store.
On the other hand, small enterprises are those businesses which employ small number of
workers in the firm and possess low volume of sales (Akehurst and Alexander, 2012). Size and
scope of these businesses is limited as they are independently owned as well as their revenue also
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depends on the industry in which they are operating. Their range is basically from convenience
stores to the manufacturing plants that are small in size. Examples of small enterprises are like a
manufacturing unit employing 10-49 people or privately owned restaurants, architectural firms,
etc. They just require a business licence for starting their business. However, some small
enterprises like retirement homes and orphanages are strictly regulated.
Other than micro and small businesses, medium scale enterprises are those that employ
50-250 persons. Their emergence is generally slow but later, they achieve a steady growth of
successful small businesses. These enterprises earn higher revenue as well as they keep some
amount of their capital aside for the purpose of hiring new employees as well as to maintain
buildings and equipment (Yi, 2015). They serve as the bridge in between small businesses and
large enterprises. Examples of medium sized enterprises in the UK are Ensoft Ltd., Wiser, The
Ginger Pig and Softwire.
Apart from micro, small and medium sized enterprises, large corporations are those in
which at least 5000 employees are working and perform business at a large scale with having
very high annual turnover. Large enterprises require high amount of investment to be made to
start the business and resources in terms of human, physical and financial. These firms can
operate at national and international levels both and keep on working on bringing innovation to
remain competitive as they have adequate capital for taking such initiatives (Perrey and
Spillecke, 2013). Examples of large enterprises in UK are Sainsbury, Asda, Hilton hotel,
Burberry, etc.
Market share, profit share, growth and sustainability
Micro businesses possess the annual revenue up to £5-10 million which leads to around
54% of the total sales of country. However, small and medium sized enterprises generally have
annual revenue approximately £10 million to £1 billion. On the other hand, large enterprises has
turnover per year more than 1.5 billion euros as well as total of balance sheet must be more than
2 billion euros. It can be said that market share of micro, small, medium large enterprises depend
on the kinds of products and services they are providing as well as on the acceptability of
customers with level of competition (Baumane-Vītoliņa and et.al., 201). Further, depending on
the size, their profit share differs but recently, it has been found that small and medium sized
organisations are earning higher rate of profits than large corporations in the UK. Further, growth
and sustainability are easier to be maintained in small and medium sized organisations as they
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have scope to get expand and less competition. However, micro businesses have very little scope
and thus, they their rate of growth and sustainability of also very low (Al Khattab and et.al.,
2012). Apart from that, large corporations have the highest rate of growth and sustainability but
there are many other factors too which create barrier like intense competition, high expectations
of customers, fluctuating market demands, etc.
3) Different structures of organisation and the way they relate with mission and objectives of
business
Kinds of structures in relation with size and scope of operations
There are mainly three kinds of organisational structures which are functional (flat),
hierarchical (tall) and matrix. Depending on the size and scope of operations in a business,
decision over organisational structure is taken. Mainly, in small and medium sized organisations
like Ensoft Ltd. and Softwire, functional organisational structure is followed because these firms
generally have specialised divisions that are assigned with performing specific tasks by the team
allotted. As the size of firms is not so large and scope increases with expansion, flat
organisational structure proves to be very helpful as it enhances the efficiency in operations
(Zhang and Huang, 2012). However, lack of interaction and ineffective communication are the
major issues with this structure.
On the other hand, large corporations mainly adopt tall organisational structure i.e.
hierarchical because of various levels of management and authorities with different product lines
as well as processes to be performed. Large enterprises like Barclays and Vodafone have very
high scope of operations with large size because of which adopting functional or flat structure is
not possible because these firms mainly operate at different geographical locations i.e. at
international level. Due to having complex nature of operations and product lines with having
expertise of members of the division to perform and direct specific tasks, tall structure proves to
be the best as it leads to increase the operational efficiency as well as improved capabilities of
employees (Nag and Chatterjee, 2018). However, with too much focus on diversification,
sometimes firms lose their focus.
Other than functional and hierarchical organisational structures, there is one more
adopted by the firms i.e. matrix. This is majorly used in firms which operate in a highly dynamic
environment and need to bring changes in structure time to time as sticking to same
organisational structure may lead these businesses to face failure and losses. Common examples
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of firms adopting this organisational structure are Marks and Spencer as well as Hotel Hilton.
Major advantage of this organisational structure is decentralisation of decision making which
leads firm to perform better with main limitation that increases the possibilities of chaos,
conflicts and confusion among employees. In this, efficiency of operations is high with increased
administration cost (Uluskan and Godfrey, 2018).
Complexities of transnational, international and global organisation structures
Organisations using transnational organisational structure mainly face the issues like
difficulty in managing the needs of different stakeholders associated with distinct products,
functions and geographical areas. This leads to create ambiguity as well as conflicts and
seriously hinders the decision making process as large number of people are involved in it.
Ultimately, these delays in decisions results in making firm bear high administrative cost (Xu
and et.al., 2016). On the other hand, companies that are involved in imports and exports but
having no investment outside their home country generally follow international organisational
structure, major complexity of which is to create balance in between making things easily done
with effective decisions and capturing the knowledge and innovation. Further, with global
organisational structure, there is issue of inevitable duplication of some activities too which takes
place in businesses operating across different regions (Kamath and Narasimha, 2016). One more
complexity associated with this structure is that many a times, uncertainty arises about where to
go so that a task can get accomplished.
The way organisational functions relate with mission and objectives of business
Organisational functions have direct link with the mission and objectives of business as
on the basis of same, they are being run in firm. It can be justified with reference to Tesco, major
objectives of which is to make the shopping cheaper so that it can be afforded by average
households, offering high quality products and fulfilling social responsibilities towards
communities. Their mission is to make better as well as together. Thus, all departments in
company like finance, marketing, sales, human resource (HR) and operations are performing
their functions with an aim to achieve the objectives and mission of Tesco. HR department is
hiring suitable and talented candidates who can perform their tasks effectually and efficiently
(Akehurst and Alexander, 2012). Marketing department is responsible for assessing the needs of
market customers and making operations unit aware with the same so that products can be
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offered accordingly by the sales team. For all these tasks, finance division is responsible to
provide sufficient funds and making them aware with the total budget of organisation in terms of
capacity to spend.
PART 2
a) Application of PESTLE model to examine the way macro environment is impacting the UK
retail sector
As per the given scenario of retail sector of UK, most of the supermarkets have decided
to restructure their businesses with an aim to increase competitiveness and effectually response
to the changes occurring on continuous basis within business environment. Thus, to assess the
way external environment is affecting the retail sector of UK, PESTLE analysis will prove to be
helpful which is given as below:
Figure 1: PESTLE Analysis
 Political – After Brexit, UK left European Union which made the pound weaker and
thus, there has become an uncertainty with future restrictions in Europe related to trade.
Further, government has levied high taxes on goods. Because of the same, profit margins
have been affected to a high extent as the footfall of people in retail stores like Marks and
Spencer, Tesco, ASDA and Sainsbury has decreased. This is the reason; Marks and
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Pestle
Analysis
Political
Economi
c
Social
Technolo
gical
Legal
Environ
mental

Spencer has decided to close some of its stores i.e. around 14 shops because of which
approximately 500 jobs are at risk (Marks and Spencer SWOT & PESTLE analysis,
2018). Tesco made plans to simplify its business by cutting jobs around 1,700. Sainsbury
decided to re-structure its management which will put a lot of jobs on risk. Also, Asda
has made turnaround plan by cutting jobs as well as costs. However, it can be said that
with implementing new planned strategies, firms can gain stability in their business and
remain in market for longer span of time.
 Economic – As there is economic rate conversions in the UK, retail firms are getting
affected in terms of making negotiation with suppliers as now there is high uncertainty in
the market and investors because of Brexit. There is high pressure on the goods with
country specific demand and supply as well as habits of consumers have been changed
due to affected spending power (Kamath and Narasimha, 2016). Cost of firms operating
in retail sector has increased and so, organisations are supposed to cut the same for their
survival.
 Social – As Tesco, Marks and Spencer, Sainsbury and Asda; all are operating their
business at the global level, they are facing the issues like cultural diversity, changes
tastes and preferences of consumers, lifestyle factors and work life balance. Thus, to deal
with the same effectually, firms are required to move towards a more inclusive approach
like setting different prices for distinct segments depending on their affordability.
 Technological – Still retail industry of UK is not so advanced in using the highly
advanced techniques and firms like Marks and Spencer are using the old technologies yet
in business (Ahmed and Alam, 2014). Thus, it is necessary to improve the e-commerce
side of business to overshadow in-store buying as this will lead to increase customer base
at low cost. Firms operating in this sector are required to improve their online presence
by providing website ease to customers which will also help in keeping the
confidentiality of data. Further, it will help in buying intelligence and analytics.
 Legal – In the UK retail industry, minimum wage rates are increasing on yearly basis and
this is impacting on business operations. Because of the same, contractual flexibility in
this sector is required for the duration when there is peak season (Kandampully, 2011).
Further, firms operating here are needed to comply with the modern slavery act with
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introducing workplace pensions to save business from any kind of obligations from the
side of government and keep their stakeholders satisfied.
 Environmental – In the current era, people have become ethically and environmentally
conscious and thus, firms operating in retail sector that are dealing with especially food
products have to ensure ethical sourcing and need to improve their relationship with
customers (Akehurst and Alexander, 2012). However, retail firms in UK like Tesco and
M&S have already improved their CSR intentions and ethical sourcing policy, still they
need to be very conscious about environmentally friendly products.
b) Application of SWOT analysis and Porter’s five forces model to Marks and Spencer
To determine the way in which decisions of Marks and Spencer being the supermarket
get influenced, SWOT and Porter’s five forces analysis can be applied which are given as below:
SWOT Analysis
Strengths
 Marks and Spencer is having high
recognition of brand.
 It offers a large variety of products
with value for money.
 Having more than 1000 stores across
the world (around in 40 nations)
offering popular designer brands.
 Company offers high quality products
with effective customer services.
Weaknesses
 Company is having bad publicity
regarding the old techniques it use and
as a non-trendy store.
 Still, M&S is following traditional
ways like manual working which is
leading to increase the cost of
operations (Marks and Spencer SWOT
& PESTLE analysis, 2018).
Opportunities
 Customer base can be increased
through developing the website.
 New market segments can be grabbed
to increase scope of business by
offering products as per their need like
for aged people (Perrey and Spillecke,
2013).
Threats
 Intense competition from companies
like Tesco, Aldi and Asda as they
offer similar products with discounted
prices.
 Different political environment of
distinct nations in terms of their
regulatory norms.
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 Can enter in new markets for
expanding the business like in
developing nations such as China and
India.
 Distinct government policies of
nations for retail sector (Baumane-
Vītoliņa and et.al., 2017).
Porter’s Five Forces Analysis
Figure 2: Porter's Five Forces Model
(Source: Michael Porter’s Five Forces Framework, 2018)
 Threat of new entrants – Threat of new entrants is low in the retail industry of UK as
after Brexit, there are a lots of restriction imposed by UK government due to which it is
not easy to enter in market as it takes enormous capital investment as well as something
radically new to get entry here. Thus, Marks and Spencer can take advantage of this and
should make efforts to hold and increase the market share with gaining customer loyalty
(Al Khattab and et.al., 2012).
 Bargaining power of suppliers – Supplier’s power to bargain from Marks and Spencer
is also low as M&S is a huge listed company and a well-known brand and thus, every
supplier desires to see its products on the shelves of this store. Further, company is
wholly dependent on the suppliers as most of their products are sold with own brands for
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which it buys raw material only. Thus, firm can enjoy the favourable margins but
maintaining healthy relations with suppliers will be helpful (Zhang and Huang, 2012).
 Bargaining power of buyers – With respect to Marks and Spencer, bargaining power of
buyers is high as there are many competitor firms available in the same market that are
offering similar products at discounted pricing like Tesco, Asda and Aldi. This is the
reason; M&S needs to be very attentive on the prices they charge as well as bringing
innovation and creativity to offer differentiation so that risk of switching of customers
can be minimised.
 Threat from substitute products – Company has high threat from substitute products as
there are many competitors available in the UK market which are offering food products
and clothing (Nag and Chatterjee, 2018). Tesco and Asda are giving higher threat due to
their launch of cheaper alternatives. However, John Lewis and Peter Jones that are also
operating in the same sector are offering high quality apparel. Thus, to deal with this
threat effectually, company is required to bring differentiation in products with setting
competitive pricing.
 Rivalry among the existing players – There is cut-throat competition in the retail sector
of UK and main reason behind this is that all firms like Sainsbury, Tesco and Asda are
dealing in number of product lines and thus creating additional rivalry (Uluskan
and Godfrey, 2018). Marks and Spencer is highly vulnerable to this competition and
therefore, it is required to bring changes in products and services time to time with
keeping acceptable pricing to retain the customers with emphasizing on maintaining the
market share.
CONCLUSION
It can be concluded from the above report that in today’s era, business environment of
UK retail industry is highly dynamic where firms are facing intense competition and fluctuation
in market demands. Thus, it can be said that if organisations operations there would not give due
emphasis on its strategies like maintaining quality of goods, retaining employees and customers
as well as increasing the shareholder’s wealth, to sustain for longer duration will not be possible.
Thus, to enhance the competitiveness and gain success and growth, organisations running their
business in retail sector of UK are required to adopt suitable strategies and bring changes time to
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time with compliance of all government norms. Further, they are needed to keep all stakeholders
satisfied to gain their loyalty for longer span of time.
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REFERENCES
Books and Journals
AHMED, F. and ALAM, M. A., 2014. BUSINESS ENVIRONMENT: Indian and Global
Perspective. PHI Learning Pvt. Ltd.
Akehurst, G. and Alexander, N., 2012. Retail Structure. Routledge.
Al Khattab, A. and et.al., 2012. "Executives' perception of political‐legal business environment
in international projects". International Journal of Commerce and Management. 22(3).
pp.168-181.
Baumane-Vītoliņa, I. and et.al., 2017. "Ethical behaviour and honesty in post-Soviet business
environment". Baltic Journal of Management. 12(1). pp.46-62.
Kamath and Narasimha., 2016. Handbook of Research on Strategic Supply Chain Management
in the Retail Industry. IGI Global.
Kandampully, J., 2011. Service Management: The New Paradigm in Retailing. Springer Science
& Business Media.
Nag, T. and Chatterjee, C., 2018. "Factors influencing firm’s local business environment in home
country context: Exploring evidences from firm surveys in India and China". Journal of
Indian Business Research. 10 (4). pp.322-336.
Perrey, J. and Spillecke, D., 2013. Retail Marketing and Branding: A Definitive Guide to
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Xu, X. and et.al., 2016. "Business network information ecological chain: A new tool for building
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Yi, J. H., 2015. History of Korean Modern Retailing: Repressed Consumption and Retail
Industry, Perceived Equality and Economic Growth. BRILL.
Zhang, A. and Huang, G. Q., 2012. "Impacts of business environment changes on global
manufacturing outsourcing in China". Supply Chain Management: An International
Journal. 17 (2). pp.138-151.
Online
Fritz, J., 2018. How Is a Non-profit Different From a For-Profit Business?. [Online]. Available
through: <https://www.thebalancesmb.com/how-is-a-nonprofit-different-from-for-profit-
business-2502472>.
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Karns, M, P., 2018. Non-governmental organisation. [Online]. Available through:
<https://www.britannica.com/topic/nongovernmental-organization>.
Marks and Spencer SWOT & PESTLE analysis. 2018. [Online]. Available through:
<https://www.swotandpestle.com/marks-and-spencer/>.
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