Impact of External Environment on Business Operations

This article analyzes the positive and negative impact of external environment factors on business operations using the PESTLE framework. It discusses the political, economic, social, technological, and legal factors that can affect a business, using examples from Sainsbury's.

Business & Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Define various kinds and purpose of business organisation; voluntary, public and private
sectors and legal structures.....................................................................................................3
P2 Define the Size and scope of organisational range.........................................................5
TASK 2 ...........................................................................................................................................7
P3 Define the relationship between various organisational function and how they link to
organisational objectives and structure..................................................................................7
TASK 3............................................................................................................................................8
P4 Analyse the positive and negative impact that external environment has upon the business
operations, with examples......................................................................................................8
TASK 4..........................................................................................................................................10
P5 Conduct external and internal analysis of specific business organisation for assessing
strengths and weaknesses.....................................................................................................10
P6 Define how strength and weaknesses interconnect with external macro factors............14
CONCLUSION..............................................................................................................................15
REFERENCES .............................................................................................................................15

INTRODUCTION
Business environment is defined as a process of sum total of internal as well as external
factor which imposes direct impact on functioning and activities of business organisation. It is
essential for every company to assess the micro and macro environment factor which imposes
direct impact on productivity of the company. Internal environment includes such as public,
customer, supplier and many more which are controllable by company. On the other hand,
External environment involves taxation structure, deflation and inflation rate etc. Sainsbury's is
the second biggest chain of supermarket founded by John James in the year 1869.
The main purpose of this company is to offer superior quality products and services to its
customer at international level. In addition to this, they boost productivity as well as profitability
of the business organisation. It helps in building brand image and reputation of the company
across the world (Duignan, 2016). This report shows the size, types and scope of different
business organisation, interconnectedness of different function and activities of company along
with linkage to organisation structure .
TASK 1
P1 Define various kinds and purpose of business organisation; voluntary, public and private
sectors and legal structures.
The main purpose is to perform different business activities and functions in suitable
manner for achieving goal and objective of the company. There are large number of business
organisation and all have different purpose within the workplace which is going to be discussed
below:
Public sector organisation
The business organisation which exists for offering facilities and services to citizens of
country are defined as a public sector organization. These are managed, established and owned
by government of nation. Crown Prosecution Service Company is major principal government
agency in public sector which operates different activities ad functions for conducting criminal
action inside the cities. This company specifically helps different business organisations within
finance, HR and other sectors where it lead them to deal with all the legal aspects so that they
could effectively conduct operations in an ethical manner. Basically, involvement of Crown

Prosecution Service would impact positively on performance level of a financial institute through
offering them with right suggestions in specified time frame.
Purpose: The main motive of Crown prosecution service is to manager all functions and
activities in an suitable manner to give legal advice to different criminal prosecution agency and
to organise prosecution in U.K.
Legal Structure: Some forms of public sector business which is going to be discussed below:
Local government: It is a legal policy which manage districts, town, cities and countries.
It includes nation along with corporate government policy.
State Government: State government shares political authorities, ability and power with
the government of nation.
Central Government: Central government which have higher authority and work in
national interest.
From the above mentioned topics, Crown prosecution services execute their work by
using central government legal constitution.
Private sector Organisation:
The business organisation which are operate by an individual person for accelerating
revenue and profit are aforesaid as private sector organisation. Sainsbury's is the largest private
sector organisation located in UK which deal in offering variety of products and services that
helps in boosting revenue and profit.
Purpose: The main purpose of Sainsbury's is to hire more and more people for providing
superior quality products and services to its customer for boosting revenue and profit.
Legal Structure: There are different forms of private sector organisation which is going
to be discussed below:
Sole traders: It is the business structure which is executed and managed by only one
person in which there is no legal distinction between the business organisation and its owner.
Partnership: It is the arrangement between two or more person for executing work in
order to share profit and revenue (Gulden and Attfield, 2016).
Private Limited Companies: This is a business structure in which liability of owner is
limited to their shares only and control shareholders from trading of shares in public place.
On the basis of above mentioned companies, Sainsbury's is going towards private limited
company structure as business is run according to the companies act.

Voluntary sector organisation: The organisation which works for social benefits rather than
profits is considered as Voluntary sector organisation. One of the leading sector named as Cancer
research in UK which helps in research activities for preventing different diseases such as cancer.
Purpose: The main motive of Cancer research is to prevent individual from different
diseases like cancer by properly treating patient who is suffering from cancer.
Legal structure: There are different type of voluntary sector organisation which is
mentioned below:
Trust: Trust is a legal structure who works only for charity purpose as well as all works
are execute as per Trust act.
Unincorporated Association: It is the organisation in which two or more person come
together for informal purpose such as club society.
On the basis of above discussion, Cancer research is followed by trust constitution.
P2 Define the Size and scope of organisational range.
In competing era, all entities that executes business operations should have appropriate
understanding related to carry forwarding activities according to set guidelines, objectives and
vision of organisation. To be different from competitors, firm uses various strategies as well as
tactics to survive in this competitive market. Differences between organisational types in terms
of size, scope and other aspects are the following:
Basis of
Differentiation
Private or profit
organisations
(SAINSBURY'S)
Not for profit or public
sector organisations
(National council for
voluntary organisation)
Non governmental
or voluntary
organisation
(Cancer Research )
Mission and Vision The vision of
SAINSBURY'S is to
be access business
globally and provide
high quality of
products and services
to its customers
NCVO a voluntary
organisation which runs
for social welfare and
creating positive
environment around the
community.
Cancer Research UK
is a organisation
who's mission and
vision is to provide
cure for cancer and a
healthy life to
everyone.

(Gupta, 2016).
Objectives Main objective of
SAINSUBURY is to
be the first choice of
customers in retailing
and to grab market
share.
The objective behind
NCVO is to maintain a
positive relationship
between all the
communities and people.
Cancer research has
objective is to safe -
guard and secure the
life of people in the
society so that a peace
will be there in
environment.
Products and
services
SAINSBURY'S deals
with variety of and
services such as
cosmetics, health and
nutrition and basic
needs. Services
NCVO products are
services are for social
welfare and provide their
services at affordable
prices ( Duignan, 2016).
Cancer research
delivers and provide
effective remedies
and quality of
services which assists
them in high
creditability of firm.
Size and scope:
Private or profit organisations- (SAINSBURY'S): In SAINSBURY's, which is a large company consists of more than 1,86,960 staff
members and scope of organisation is expanding at rapid level because of satisfied
customers and management.
Not for profit or public sector organisations- (National council for voluntary organisation): NCVO, which is an NPO organisation which is carrying small size at present within the
market where employee size is approximately 200 and is growing its activities in wider
area. Scope of NCVO is spreading amongst all the organisation and helping people to
achieve common goals and objectives.
Non governmental or voluntary organisation- (Cancer Research):
 In this, Cancer Research consists of large size and employees are approximately in the
amount of 3,964. and scope is wider and expanding at rapid level. Firm development
depends upon its level of size and scope.

TASK 2
P3 Define the relationship between various organisational function and how they link to
organisational objectives and structure.
Organisational function: It is considered as a process in which different set of business
activities and functions performed within the market place. There are different functions in the
company which involves Marketing, production, Human resource, Administration, Finance and
Research& Development. They all have their own significance as well as interconnected with
each other which is going to be discussed below:
Production and Finance: The production and finance function of company is
interrelated with each other(Schwepker and Ingram, 2016). The production function emphasised
on maintaining proper inventory of products to deliver to its customer. On the other hand,
finance is required for all production activity of business. In addition to this, money is required
for manufacturing of finished product in suitable manner. Therefore, they both are
interconnected with each other. In context of Sainsbury's, the supervisor emphasised on
manufacturing the unique product according to the need and wants of customer in order to
satisfy them. For achieving this goal, Production department assess the need of finance and
resources for accomplishing objective within stipulated time period (Lyu and Hwang, 2017).
Human Resource and Administration: Human resource and administration department
are interconnected with each other. Human resource plays a very important role in every
organisation for recruiting, selecting, conducting training program for candidate to perform well
in the organisation as well administration maintain proper records of all personnel. In reference
of Sainsbury's, the HR manager recruit talented employees that helps them in increasing the
satisfaction level of customer and maintain proper report of issues that assists the management in
maintaining healthy environment within the organisational premises.
Marketing and R&D: The marketing as well as R&D department is interlinked with
each other. The R&D Department of Sainsbury's emphasised on making effective strategies, plan
and policies for identifying the need of customer. Therefore the marketing department use
promotional strategy for attracting more and more customer. As it reflects that they both are
interconnected with each other.

Overview
The production , marketing, administration, financial, as well as R&D department is
interlinked with each other. The financial department handle the various income and expenditure
that is charge in production of product and services. In addition to this, the marketing manager
analyse the need and requirement of customer in order to satisfy them. Then manager of
production department manufacture products according to the need of customer. Apart from this,
R&D Department make effective strategies, policies and in order to analyse the need of
customer. And administrative department control and monitor all activities and functions within
business organisation. Therefore, they are department interconnect with each other.
Organisation Structure: It is an arrangement of various functions and activities that are
to be organised for achieving organisational goal and objective. It define the flow of data and
information from top level to lower level management inside organisation. There are various
kinds of structure which is given below:
Flat Organisation Structure: It refers to the structure in which flow of information
between top level to lower level of subordinates. In context of Sainsbury's, they adopt flat
structure in order to linked directly with lower level of employees.
Divisional Structure: It is the process in which employees are classified into various
sections that contains unique products and services. Each division has power to execute its
functional operations.

(Source: Organisational Structure, 2015)
TASK 3
P4 Analyse the positive and negative impact that external environment has upon the business
operations, with examples.
Macro environment includes those factors which are uncontrollable by the business
organisation. The company adopt PESTLE analysis for assessing the factors which imposes
direct impact on business activities and functions which is given below:
PESTLE framework
It is a framework of environment scanning which uses six factors to analysis the impact of
external factors on an running organisation. Managers uses this tool for monitoring external
environment factors. PESTLE analysis describe political,economical,social technological,and
legal factors of the organisation (Nyström and Mustonen, 2017). Success of an company totally
depends on how well organisations analysis their environment factors and then make policies and
plans which help them to achieve sustainable competitive advantage in company. The impact of
these factors on Sainsbury's which is discussed below:
Illustration 1: Organisational Structure

Political factors:These factors includes all polices ,rules and regulations implemented by
government of country. The factors are used to determined the level at which political factors
influences industries profitability level.
Positive impact: Due to political stability of UK which imposes positive impact on
organisation. Due to stable political condition and taxation structure that helps in boosting the
future sales of business organisation. Due to stable taxation policy the company does not change
their policy frequently. It helps the company to take less time as well as minimise their effort.
Negative Impact: Due to frequent change in rule and regulation affect the company in
negative manner. It is compulsory for company to change their policies and rules due to
alteration in rule as well as regulation of company. In addition to this, alteration in laws and
legislation increases the burden of business organisation.
Economical factors: These are those factors which impact on performance level of any
organisation. Economic factors include industry life cycle,inflation rate,interest rate,economic
growth rate, exchange rate and so on which is mentioned below:
GDP- It is also known as Gross domestic product in which value of goods and produced
is known. UK's GDP is higher so organisation growth boost up and it helps the business to
expand its activities at rapid level.
Exchange rate- This is rate in which currency of one country is exchange with other
country. In relation with SAINSBURY'S, they reserve the exchange currency in appropriate
manner.
Positive impact: Sainsbury's provides superior quality products and services to its
customer it imposes positive impact on mindset of customer. They offer innovative goods to its
user in order to satisfy them as well as it will boosting productivity as well as profitability level.
It helps company in boosting its future sales as well as profitability level.
Negative Impact: Due to increase in inflation rate which imposes direct impact on growth
and progress of Sainsbury's. As a result it reduces market share of company as well as add cost to
its product it affect company in adverse manner. Due to increase in inflation, it increases the cost
related of raw material that is used for production of products and services.

Social factors:These factors includes demographical factors. Company use to monitor
social factors to identify customers preferences their demands, their perception regarding
organisation.
Positive impact: The manager of Sainsbury's provides high quality products and services
to its customer thus it increases sales and profitability level. They offer products for increasing
standard of living of its customer in appropriate manner.
Negative Impact: Due to increase in labour cost it imposes negative impact on activities
and functions of business organisation. As a result it imposes extra cost of product to its
company.
Technological factors: Technology plays a significant in every organisation to
implement business activities and function in an effective manner (Orhan, 2016). In context of
Sainsbury's, the manager focuses on implementing advanced technology for boosting sales and
profitability of the company.
Positive impact: Due to implementation of advanced technology, Sainsbury's perform its
functions and activities in an appropriate manner for boosting profitability level. They execute
advanced technology for reducing paper work.
Negative Impact: The frequent changes in technology results in increasing the cost
which imposes negative impact on the profitability and revenue of the Sainsbury's. It is not
possible for company to bear the cost of execution of advanced technology regularly.
Environmental factors: These factors involves climate, weather condition and natural
resources of the country. Organisations must be use those materials which is not harmful to
environment. Sainsbury's offer products and service to their clients which increase the standard
of living of society.
Positive impact: Sainsbury's provides superior quality products and services that helps in
accelerate the living standard of society. It focuses on improving the lifestyle as well as
preferences of company. They offer quality products as well as services to its customer that is
eco- friendly products for its customer.
Negative Impact: The investment in CSR is high which increases the risk for company. It
imposes adverse impact on profitability of business organisation. The company invest their
money in responsibility towards society so that the company does not made any efforts in
respect of earning money.

Legal factors: These factors involves laws, legislation, ethical rules, regulation,
protection law and so on. It imposes direct impact on activities and functions of company
positive as well as in negative manner.
Positive impact: Sainsbury's develop its own policy and procedure which helps company
in maintaining healthy relation with its employees. They follow all laws and legislation which
increase the performance level of company.
Negative Impact: The legal structure of Sainsbury's is very complex which imposes
penalties that is very high. Therefore, it add extra cost to the company and affect the future
success and growth of business organisation.
TASK 4
P5 Conduct external and internal analysis of specific business organisation for assessing
strengths and weaknesses
Micro environment is considered as a sum total of internal factor that imposes direct
impact on productivity as well as profitability level (Pearson, 2017). Sainsbury's adopt different
types of framework to assess its internal environment which is given below:
Porter's five force model
Porter's five force model is adopted for assessing internal environment and its impacts
which is described below in relation to Sainsbury's:
Threat of new entrants: Sainsbury's is a largest chain of supermarket which deals in
variety of products and services in order to increase future sales and growth of company.
Therefore, the threat of new entrance is quite low as well as imposes zero effect on the business
organisation.
Threat of Substitute: There are various competitor deal in similar products at same price
which is the threat for company to lose its customer base. Whereas, Sainsbury's provided high
quality products to its customer in order to accelerate customer trust and loyalty level.
Buyer's power: In this strategy, the power of consumer is high. In present context, the
customer need and wants change frequently that imposes negative impact on the organisation.
The manager of Sainsbury's make effective strategies, plan and policies for satisfying the need of
customer.

Supplier's power: Herein, there are huge number of buyer available in the marketplace.
Therefore, the power of supplier is high. The manager of Sainsbury's emphasised on providing
high quality products and services to its customer in order to satisfying them as well as charge
price according to the market situation.
Competitor Rivalry: There are different type of competitor available in the marketplace.
Therefore, the supervisor of Sainsbury's emphasised on offering unique and specific products and
services to its customer in order to gain competitive advantage over rival firm.
On the basis of above mentioned model, it has been analysed that these factors is
advantageous for firm and raise its core competencies that is profitable for business organisation.
VRIO analysis
It is determined as analytical framework which helps in assessing internal capabilities of
the business organisation (Sales and Beschorner, 2017). In context of Sainsbury's, the manager
analysis their internal strength and weaknesses which is going to be described below:

Resources Valuable Rare Inimitable Organised
Global Existence ✔ X X X
Competent
employees
✔ ✔ X X
Distribution
Network
✔ ✔ ✔ X
Financial
Resources
✔ ✔ ✔ ✔
Valuable: Sainsbury's possess global existence around the world which is valuable
resources. The manager provide effective training to its employees that helps in boosting
profitability level. In addition to this, distribution network and financial resources are also
valuable one.
Rare: There are various company who have a global existence which is not rare. The
manager of Sainsbury's provide effective training to its employees which is rare in this
organisation (Schlesinger and Rahman, 2016). In addition to this, distribution network as well as
financial resources is also unique and specific.
Inimitable: This company provide timely delivery to its customer as per their need and
wants which is not copied by its rival firms as well as its financial resources offer variety of
opportunities that is not copied by rival firms.
Organised: The financial resources of Sainsbury's provides external opportunities in
order to reduce the threat is considered as a organised resource.
SWOT analysis of TESCO
Strength Weakness
 This company has good reputation
worldwide and it provides quality
products and services.
 It is serving in more than 20 countries.
 Approximately 27% is the market share
 This company has faced competitive
pressures that has led to price wars.
 Tesco is dependent on Europe and UK
for the sales and it has not put efforts to
expand market share in developing

that Tesco is continuously dominating
grocery retail market of UK.
countries.
 Due to its high debts and credit card
liability, Tesco’s financial profits are
profoundly affected.
Opportunity Threat
 Strategic alliance for attracting
consumers in different markets.
 There is opportunity to enter into online
shopping sector (Schwepker and
Ingram, 2016).
 Developing strategic partnerships with
reputed companies.
 There are credit crunches and economic
recessions within market which have
threatened profitability.
 Food prices are high and consumers
buy products from small stores.
 Backlash faced by Tesco on social
media at the time of Christmas.
SWOT analysis of Sainsbury's
Strength Weakness
 It has successful track record of
integrating firms by mergers and
acquisitions.
 This company has good customer
relationship management and good
brand image within market.
 Low-cost strategy adopted by
Sainsbury's has helped company in
selling different product lines to
potential customers.
 This company has poor demand
forecasting of products.
 This company is not able to take big
challenges in market.
 High risks of online retailers most
retailers have lost volumes.
Opportunity Threat
 There is opportunity for opening up
new markets with government
 The demand of highly profitable
products in season increases and thus

agreements.
 When there is stable free cash flow for
investing in product segment.
 Expansion among growing economies.
people compare price with other
supermarkets.
 When there is shortage of skilled
workforce company is not able to make
profits or sales.
 It will be required by Sainsbury's to
keep on sourcing itself with the best
quality to gain competitive advantages.
P6 Define how strength and weaknesses interconnect with external macro factors
Interrelation Strengths Weaknesses
Political Factor: The political Structure of UK
is stable which is considered as
a strength for Sainsbury's as it
assists them in executing work
properly without any changes.
When frequent changes in
policies, rules and regulations
by political factor, thus it is
considered as the weakness for
Sainsbury's because it involves
huge amount of risk.
Economic Factor: Sainsbury's is one of the
second largest supermarket
which provide superior quality
of products and services to its
customer in order to satisfy
them. It helps in increasing
sales and profitability level is
considered as a strength of the
company (Sun and Richardson,
2016).
Due to increase in bank rate
and currency rate of UK which
imposes negative impact on
the productivity as well as
profitability of the company.
Social Factor: Herein, the company timely
deliver their product and
services to its customer thus it
Due to change in behaviour
and attitude of customer is
considered as a weakness for

build their trust and loyalty
level in order to increase future
sales and profitability level.
the company .
Technological factor: Sainsbury's implement latest
technology that increases sales
that is considered as the
strength of company.
Due to frequent changes in
technology increases the cost
of its implementation which is
considered as the weakness for
company.
CONCLUSION
From the above discussed report it has been analysed that proper understanding of
business environment is necessary for business success and growth. Different types of
organisation including private, public and voluntary sector organisation run with various scope,
products and objectives in a country. External environment assess PESTLE framework for
acquiring knowledge regarding impact on organisation. Internal environment adopt Porter five
force model for analysing several impact on business organisation. The SWOT and VRIO model
is used for analysing strength and weakness of the company.
REFERENCES
Books and Journals
Duignan, J., 2016. A dictionary of business research methods. Oxford University Press.
Gulden, J. and Attfield, S., 2016, September. Business process models for visually navigating
process execution data. In International Conference on Business Process
Management (pp. 583-594). Springer, Cham.
Gupta, M., 2016. An empirical study on fit between strategic human resource management and
business strategy. International Journal of Management Research and Reviews. 6(2).
p.102.
Linder, M. and Williander, M., 2017. Circular business model innovation: inherent
uncertainties. Business strategy and the environment. 26(2). pp.182-196.

Lyu, S. O. and Hwang, J., 2017. Saving golf courses from business troubles. Journal of Travel &
Tourism Marketing. 34(8). pp.1089-1100.
Nyström, A. G. and Mustonen, M., 2017. The dynamic approach to business models. AMS
Review. 7(3-4). pp.123-137.
Orhan, E., 2016. Building community resilience: business preparedness lessons in the case of
Adapazarı, Turkey. Disasters. 40(1). pp.45-64.
Pearson, R., 2017. Business ethics as communication ethics: Public relations practice and the
idea of dialogue. In Public relations theory (pp. 111-131). Routledge.
Sales, A. and Beschorner, T., 2017. Societal Transformation and Business Ethics: The
Expansion of the Private Sector and its Consequences 1. In The moralization of the
markets (pp. 227-254). Routledge.
Schlesinger, P. A. and Rahman, N., 2016. Self-service business intelligence resulting in
disruptive technology. Journal of Computer Information Systems. 56(1). pp.11-21.
Schwepker, C. H. and Ingram, T. N., 2016. Ethical leadership in the salesforce: effects on
salesperson customer orientation, commitment to customer value and job stress. Journal
of Business & Industrial Marketing.
Sun, H. and Richardson, J. T., 2016. Students’ perceptions of the academic environment and
approaches to studying in British postgraduate business education. Assessment &
Evaluation in Higher Education. 41(3). pp.384-399.
Tho, N. D., 2017. Knowledge transfer from business schools to business organizations: the roles
absorptive capacity, learning motivation, acquired knowledge and job
autonomy. Journal of Knowledge Management.
Online:
Organisational Structure. 2015. [Online]. Available through:
<https://csidc.in/home2/index.php/en/2015-01-25-06-37-16/organisational-structure>.