Business and Business Environment

This document provides an overview of the business environment, including different types of organizations and their purposes. It also discusses the interrelationship between various organizational functions and the impact of macro environment on business operations. Additionally, it identifies the strengths and weaknesses of Sainsbury using SWOT analysis.

BUSINESS AND BUSINESS
ENVIRONMENT

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................2
LO 1.................................................................................................................................................2
Different types of organisations and their purpose......................................................................2
Scope and size of organisations...................................................................................................3
LO 2.................................................................................................................................................4
Relationship between various organisational functions..............................................................4
LO 3.................................................................................................................................................5
Impact of macro environment on business operations................................................................5
LO 4.................................................................................................................................................6
Identifying strengths and weakness of organisation using SWOT..............................................6
Interrelation between micro and macro factors...........................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment is known to consist of all parameters which can affect decision
making and strategic direction of organisation. These factors have varying impact on different
types of organisations which have distinguish features on the basis of purpose, size and scope
(Hamilton and Webster, 2018). Thus for long term success it is very crucial for organisation to
assess the impact of macro and micro environmental factors on their decisions. The report will
discuss the types of organisation and interrelationship between their functional units. It will also
use suitable models such as PESTLE and SWOT to assess the role of business environment in
organisational activities and decisions. The study will also describe and evaluate the relationship
between macro factors and organisational strengths or weakness.
LO 1
Different types of organisations and their purpose
Business is defined as the process of converting material and skills as per the required
products and services expected by customers. Different types of organisations are as follows:
Private organisations: These organisations are owned by private individuals and aims at earning
profits. For example organisations like Sainsbury have key purpose of gaining profits from their
functions. Private organisation can be of various types like partnership, cooperative, sole traders
and limited companies (Prajogo, 2016). Private organisations can be owned by both government
and other private bodies. They have great contribution in the economic development. Private
organisations are required to emphasis on revenue generation and net income so that they can
gain competitive advantage.
Public: This type of organisations are controlled and owned by government or their related
agencies. Their purpose is to ensure the well being and benefits of citizens. Example of such
organisation is Virgin money which provides financial services to bank. The services of public
organisations help society by developing a positive relationship with them and through this also
gain sustainable profits for the shareholders.

Voluntary: These organisations are non profit and non government organisations which work
for communities (Deasy and et.al., 2016). For instance Cancer research organisation is a
voluntary group which works for the awareness and treatment of cancer. Voluntary organisations
carry out social activities which aim at only enriching the society without any profit objective.
Different legal structures which are associated with these organisations are limited
companies, partnership and sole proprietorship. In sole trade business is owned by a single
individual only and thus a single person has liability of all organisational resources. On the other
hand partnership is owned by two or more parties and thus is governed by partnership deeds.
Scope and size of organisations
Size and scope of different organisations is discussed as below:
Micro enterprises: In these organisations employment level and investment capital is low. These
organisations provide great contribution in developing economies. For instance Cancer research
UK is an example of micro enterprise.
Small organisations: Organisations such as Tesco falls in these categories and are owned
independently. These organisations include small number of employees (Cepel and et.al., 2018).
Small organisations are owned by sole traders which may vary in terms of structure or size.
Medium and large enterprises: In this type of organisations employees work as voluntary
members and are also involved in multinational bodies which have growth potential. This type of
organisations includes multinational organisations such as Virgin money which works in
government sector. These organisations earn huge money and keep their earned capital for future
development goals.
Micro organisations like Cancer research are large and work for increasing their growth
in developing countries. Since this organisation is voluntary type it needs low investment but
works on wider context for meeting its social purpose (Gaganis, Pasiouras and Voulgari, 2019).
Similarly small sector organisations aims at increasing their sales volume by holding
partnerships with other individuals or organisations. Such types of organisation have strong
controllability over their management so that they can meet the requirements of their customers.
On the other hand large and medium enterprises work solely s non profit company and thus work

as channel to help individuals. They are highly flexible and have strong relationship with their
customers.
LO 2
Relationship between various organisational functions
The organisations such as Sainsbury have different functional roles which are not only
interrelated with each other but also aligned with the objectives and structure of the organisation.
The interrelationship between these functions is as follows:
Marketing function: To promote the products and services Sainsbury uses effective marketing.
However marketing must meet the accounting limits and operational requirement of the
organisation. It is also associated with the human resource management (HRM) as for achieving
desired outcomes organisation needs talented and skilled employees which are hired through
HRM function (Calabrese and et.al., 2018). Marketing functions are also designed and performed
in a way that they meet the operational requirements. For achieving the desired profits it is also
necessary that marketing budget must meet the accounting considerations of the organisation.
Accounting function: The analysis and management of expenses and profit is managed through
accounting function. However for accurate analysis this department must have proper
coordination with the operational and marketing teams. The budget and financial resources of the
company are also based upon scope and long term objectives of the organisation. Accounting
department of Sainsbury provide appropriate financial resources to all other functional activities
depending upon their needs.
HRM function: This is one of the most important functions which ensure that suitable and
talented employees are available in all other functional units of organisation. All other functional
units of organisation can work successfully if they have talented team workers (Akhmetshin and
et.al.,2017). To recruit suitable candidate for performing specific organisational functions, HR
department must communicate and understand the requirements of other departments like
marketing, customer service and accounting.

Operational and customer services: This functional department of Sainsbury aims at providing
products and services to its targeted customers as well as to resolve the concerns of their
customers. For quality services it is essential that there are not conflicts between required
services and those which are delivered to the customers (Gavurova and et.al., 2017). It is
possible only when operational and marketing functions are performed simultaneously and in
coordination. Satisfactory customer’s services are not possible without talented and trained
human resources of the organisation which are managed through HRM functions of the
company.
LO 3
Impact of macro environment on business operations
The external macro environment includes all those factors which are not controlled by the
organisation and thus affect the operations and decisions of organisation. The impact of these
factors on Sainsbury is as follows:
Political: The political instability such as Brexit can affect organisational success and
operational continuity in various aspects. On negative grounds after Brexit, Sainsbury may have
to follow different EU and UK regulations and thus it can make its operations complex, costly
and restricted in some regions of UK (Akhtar and Sushil, 2018). However on positive side it is
also possible that organisation may find possibilities to capture new regions in which Sainsbury
can establish itself as strong brand by launching low cost or innovative products.
Economic: Economic factors such as inflation and unemployment rates have direct impact on
profitability of the organisation. In unstable economies the people may not prefer excessive
purchasing and thus it can bring decline in the sales and profitability of the organisation.
However at the same time during economic instability Sainsbury also have chance to use low
pricing strategy and to strengthen its brand value.
Social: The social factors such as life style, culture and attitude of people affects most of the
decisions of the organisation (Jaakkola and et.al., 2016). For instance when Sainsbury integrate
the cultural values in its promotional activities and product attributes then it has positive impact
on the customers and organisation can increase its sales. However it can be a tough task for the

organisation to satisfy and integrate cultural and religious needs of all social communities. The
failure in it can have adverse impact on brand perspective of organisation and can result in long
term damage.
Technological: It can be considered as one of the most powerful factor. Recently the
technological advantages such as online retailing and digital marketing have helped Sainsbury to
expand its business and to manage its services with more efficiency (Vasilev and et.al., 2017).
However with this positive aspect organisation also face several threats such as cyber risks,
increased maintenance cost and data privacy issues. If Sainsbury does not pay attention to these
technological issues then it can result in legal consequences as well as financial frauds.
Environmental: Environmental issues like climate change or natural calamities can influence the
supply chain continuity of Sainsbury. Thus organisation may fail to deliver services to its
customers on time. However on positive context corporate sustainable responsibility and
environmental measures of Sainsbury builds a positive image of organisation among people and
thus it enhances the trust and loyalty of customers towards brands. The environmental changes
such as climate issues or natural hazards can also have adverse impact upon decision making of
the business (Klapper and Love, 2016). These natural hazards can restrict the free flow of goods
and services and thus the supply chain of organisation can have negative impact on it.
Legal: Sainsbury is also bound to legislations such as taxation policies, employment and
customer safety legislations. These legislations increases the operational cost of the services as
company has to follow fix standards and guidelines. However as positive outcomes legal
considerations also help Sainsbury to accomplish its operational activities efficiently and in
profitable manner.
LO 4
Identifying strengths and weakness of organisation using SWOT
The analysis of internal capabilities of Sainsbury is as follows:
Strengths: Sainsbury has effectively expanded its brand from small grocery shops to
supermarket chain. The low cost strategy has helped organisation to retain customers for long

run (Simion, Popescu and Bucovețchi, 2019). Its innovative and wide range of services along
with the loyalty coupons are contributing greatly in attracting new customers and retaining
existing one. Thus strong brand value and presence among people is considered as great strength
for the organisation to achieve its profitability goals. Organisation is effectively using
automation to enhance the quality of its service delivery. Effective and beneficial technological
advancements has also enabled organisation to scale up and down its economy as per the market
requirements and demands.
Weakness: One of the weaknesses of Sainsbury is that due to increasing competition it is
becoming challenging for Sainsbury to retain its customers and to avoid brand switching. As
compare to other retailers it also has limited presence in foreign markets. Amid challenges in
retail organisation is also having low margin and rapidly increasing costs in procurement and
expenses in improving customer experience. Product demand forecasting is also one of the weak
aspects of Sainsbury performance (Brennan, Canning and McDowell, 2017). Due to poor
forecasting organisation has witnessed higher rates of unutilised opportunities. As a result of this
company also faces financial and operational challenges due to unmanaged inventory.
Opportunity: Supermarket culture is growing at great speed and thus it gives huge opportunity to
Sainsbury to grow in such market. Further advanced and remote technology can also allow
organisation to enhance the quality and scope of its services. To strengthen its global presence
company Sainsbury has choice to effectively and intensively use technological advancements
such as mobile application based bookings and automated bill counters. It will also help
organisation to gain sustainable competitive advantage. Another opportunity which can be
grabbed by organisation is stable cash flow which will allow Sainsbury to make higher
investments in adjacent and new product segments (Bhaain, 2019) . In addition to this online
channels are also providing a completely new and broad segment of customers which can bring a
great increase in the sales of organisation.
Threat: The organisations like Asda, Lidl, Tesco and Aldi are providing great competition to
organisation. The retail industry has been completely transformed into live ground of battles on
online services. Thus substitution threat is one of the key concerns for Sainsbury. In addition to
this with online retailing services it is also challenging for the organisation to manage the risks of

information technology which otherwise can be harmful for the brand value and customer
retention.
Interrelation between micro and macro factors
There have been strong and significant relations between external factors and the way
they impact strengths and weakness of the organisation. One of the strength of Sainsbury is
brand value. However with increasing competition and technological advancements this aspect is
also affected. Organisations such as Tesco are effectively using technology to increase their
market share. The increasing role of technology by other organisations is affecting the existing
market share of Sainsbury. The environmental factors like climate change or environmental
regulations are also making it essential for the organisations to review their operational strategies
and to make them more sustainable. For instance the positive brand value of organisation can
also be increased if Sainsbury follows its corporate social responsibility.
The participation in charitable events, waste management strategies will create a positive
impact on the brand perception of the organisation. It will help Sainsbury to overcome the threats
and issues of rising competition within business environment. Customer retention is also a tough
task for Sainsbury because other leading retailers are also using same strategies of low pricing or
discount coupons. However to make customer retention more influencing company can also
integrate cultural and social considerations (Teece, 2018). For instance organisation can identify
the various cultural aspects which can be linked in promotional strategies of the organisation.
The association of promotional events with culture will give more satisfactory results and it will
be easy for people to connect emotionally with the organisation. Such kind of emotional
attachment plays a crucial role in the success and long term growth of the organisation.
For retaining loyal customer and meeting global expansion opportunities it is required
that companies must follow the legal consideration. Legal regulations may vary from one
political environment to other. Thus if organisation fails to meet these requirements then it
results in financial penalties as well as deterioration of the brand value of organisation. Without
compliance to these regulations organisation may not provide services to its customers. Thus this
external factor has significant role in implementing the growth planning of the organisation. The
failure to take these external factors into consideration can have adverse impact on profitability
and expansion plans of the organisation.

CONCLUSION
It can be concluded that size and purpose of organisation are crucial in determination of
long term operational and functional strategies. Thus organisations must understand their
purpose and function in the same direction. It has been also analysed from the above discussion
that macro environment have both positive and negative impact on organisational performance
and operations. Hence it is essential for the organisation that this effect must be identified and
suitable actions must be taken by the organisation to minimise the risks and grab the success
opportunities on behalf of organisational strengths and weakness. It can also be concluded that
the interrelationship between functional departments is necessary and vital for the successful
operations and thus companies must also focus on analysing and improving this relationship.

REFERENCES
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Teece, D.J., 2018. Business models and dynamic capabilities. Long Range Planning, 51(1),
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Online
Bhaain, H., 2019. SWOT analysis of Sainsbury. [Online]. Accessed through <
https://www.marketing91.com/swot-analysis-of-sainsbury/ >.