Factors Affecting Business Environment

This report discusses the business environment, which is a combination of internal and external factors. It highlights the importance of stakeholders in businesses, such as customers, employees, shareholders, and suppliers. The external factors, including political, social, and legal, are also discussed, emphasizing their impact on business activities.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1- Describe the type of business, purpose and ownership of two contrasting businesses....1
P2- Different stakeholders who influence the purpose of two contrasting businesses...........2
TASK 2............................................................................................................................................3
P3- How two businesses are organised..................................................................................3
P4 Explain how their style of organisation helps them to fulfil their purposes.....................4
TASK 3............................................................................................................................................4
P5- Describe the influence of two contrasting economic environments on business activities..4
TASK 4...........................................................................................................................................5
P6- Political, legal and social factors are impacting upon the business activities .................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business environment connotes external forces, factors and institutions that are beyond
the control of the business and they affect the functioning of a business enterprise. These include
customers, competitors, suppliers, government, and the social, political, legal and technological
factors etc. Sainsbury is a big chain of the super market in United Kingdom. Its supermarket
provides groceries, households, clothing, many food items etc. In this report mentions about the
various type of business and their purpose or ownership. The stakeholders are of different types
who impact on the objective of two businesses (Babatunde and Adebisi, 2012). In this present
report also mentions about the impact of two economic environments on business activities with
in Sainsbury business firm.
TASK 1
P1- Describe the type of business, purpose and ownership of two contrasting businesses
Sainsbury is a large business firm and it is a retail sector business firm. It is a second
largest chain of supermarkets in United Kingdom. There are two different business organisation
Sainsbury and other one is Tesco. It is also a retail business firm and this company deals in many
products and services such as electronics, clothing, internet service provider etc.
Tesco is a big reatil company and It is the third largest retailer in the world measured by
profits and ninth-largest retailer in the world measured by revenues. It has stores in 12 countries
across Asia and Europe and is the grocery market leader in the UK (where it has a market share
of around 28.4%), Ireland, Hungary and Thailand (Chavis, Klapper and Love, 2011). Tesco has
diversified geographically since the early 1990s and into areas such as the retailing of books,
clothing, electronics, furniture, toys, petrol and software; financial services; telecoms and
internet services.
The type of this business firm is public and the main purposes of this company are as
follows:
 Tesco adopts its strategy with a core purpose 'to create value for customers to earn
their lifetime loyalty.' This is expressed as two key values.
 Its main purpose is to increase profit by providing good quality services to its
customers.
 Treat people in an effective manner.
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 It positions all its resources with a purpose to satisfy this strategy while achieving
its organisational goals.
Sainsbury is a private supermarket and its main purposes are:
 To satisfy the needs and wants of customers
 To improve the quality of products.
 Work for welfare of society
P2- Different stakeholders who influence the purpose of two contrasting businesses
Stakeholders: A stakeholder is anybody who can affect or is affected by an
organisation, strategy or project (Chow and et.al., 2011). They can be internal or external and
they can be at senior or junior levels. A stakeholder is a party that has an interest in a company,
and can either affect or be affected by the business. Stakeholders are customers, government,
society, employees, shareholders etc.
Illustration 1: Stakeholders, 2017
(Source- Stakeholders, 2017)
Employees – These people within a business influence a reasonable amount of what
direction the business goes. The employees are the workers, which allow the business to sell its
products or run, and without employees depending on the business, it is impossible to make any
sort of impact on the business world (Craig and Campbell, 2012). This is why employees must
have particular rights as well as given various exclusive options.
Customers – A business that sells anything to customers consequently means that
customers (stakeholders) who a large influence on a company as their money is what keep the
company running. Customer feedback is vital for a company, as companies that ignore feedback
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from its customers often have no competitive edge over its competitors. Sainsbury business firm
deals with its customers is a proper manner and also provides good quality of services.
Manager- A manager is an individual who is in charge of a certain subset of the
company. A manager often has a state of people who report to him or her (Fernando, 2011). A
manager sets objectives, organises, motivates, communicates and develops people.
Creditors- Businesses commonly use lenders to finance business ventures, building and
asset purchases and supply purchases. Banks often provide loans for major purchases, such as a
new building. Suppliers may provide product inventory on account, which a business than pays
down the road. Current creditors basically expect that a business meets its payment deadlines
responsibly and consistently. Doing so helps your business maintain good relationships with
creditors and also makes you more likely to get quality financing in the future.
TASK 2
P3- How two businesses are organised
All organisations need an organisational structure which can help to manage the business
so that it can be successful. The structure can be shown in an organisation chart which is used to
represent lines of authority within an organisation.
Hierarchical structure- This structure is used by businesses to show how Sainsbury is
organised by showing the levels of authority, the span of control and the chain of command. In a
hierarchical structure the person with the greatest authority is at the top and each level has a
subordinate apart from the bottom level (Gecevska and et. al., 2010). Each level has managers or
employees of equal authority or status.
Flat organisational structure- This structure has few levels of hierarchy and
management which are usually 2 or 3 levels. It has a short chain of command and each manager
has a shorter span of control. Tall structures are very similar to flat organisational structures but
instead have a longer chain of command from the top to the bottom of the organisation. Each
manager also has a narrow span of control.
Matrix organisational structure- A matrix organizational structure is a company
structure in which the reporting relationships are set up as a grid, or matrix, rather than in the
traditional hierarchy. In other words, employees have dual reporting relationships - generally to
both a functional manager and a product manager.
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P4 Explain how their style of organisation helps them to fulfil their purposes
Sainsbury
The style and organisation of this firm and Richmond helps them fulfil their purpose by
organisation and making a clear understanding of what an organisation needs to do in order to
run its business and how and who is running what part of the organisation (Hamilton and
Webster, 2015). Their hierarchy helps them organise different departments and who is in control
and running that certain department. The style helps an organisation know what areas need
improvement and how they are going to achieve their aims and goals.
Tesco
As Tesco is a profit-based business, it maximises their sales and profit, expanding to
maintain its competitiveness in addition to outshining competitor. It also focuses on providing
shareholders with progressive returns on their investment improving profitability through
investment in efficient stores and distribution depots, in productivity improvements and in new
technology, developing the talents of its people through sound management and training
practices, while rewarding them fairly with equal opportunities for all. Another objective of
Tesco is working closely with suppliers to build long term business relationships based on strict
quality and price criteria, participating in the formulation of national food industry policies on
key issues such as health, nutrition, hygiene, safety and animal welfare and supporting the well-
being of the community and the protection of the environment.
TASK 3
P5- Describe the influence of two contrasting economic environments on business activities
In UK, how Sainsbury operated during the recession and the boom period. The UK is in
the growth economic environment and this means the country was before in the recession
economic environment and now it is growing (Iskanius, Page and Anbuudayasankar, 2010).
This does not mean they are a rich country compared to China.
Sainsbury’s would be affected if there are changes in the economic environment and
these are growth, recession and ripple effect. Growth is when more products are being produced
and consumed. This also means the incomes are rising. So in Sainsbury’s, if customers buy more
goods and services, the production department would make more products than the usual so that
they can sell more products. This also means that the company would employ workers and invest
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in equipment such as machinery where they would use this to make more products. When
Sainsbury’s sell more products to customers this means the business is making a profit.
Recession is when there is a decline in the GDP and this also means there is an increase in the
unemployment rate. Recession will take place if customers tend to save more money than to
spend it on goods and service (Pulver, 2012). Also if producers tend produce fewer goods can
also result to recession. If Sainsbury’s were in recession they would not be affected as other
business however at this state customers would save more money than buy more goods and
services and the production department might not make goods to sell, and this means they would
lose some of their profit. The ripple effect is the beginning of the recession and if Sainsbury’s
were in this state they would not suffer badly as other business because people still need to shop
in one of the big companies.
Inflation Inflation occurs when there is a general rise in the price of the goods in this
business firm. Not every price is rising but the average price is rising.
TASK 4
P6- Political, legal and social factors are impacting upon the business activities
Political, legal and social these three factors affect lot on business activities these are the
external factors which are not controllable by this Sainsbury business organisation.
Social factors- Social changes may have a major impact on business. Society is
continually changing. For example, tastes and fashions constantly change. As an example,
consider the growing popularity of social media such as Facebook, especially among younger
people. Unlike their parents, young consumers have been brought up in an age where mobile
phones and computers are used every day. Young customers are more likely to use digital
technology, to shop online and to prefer online methods to print images. Older generations are
more likely to stick to traditional methods. For example, they are more likely to want to have
their photos developed and printed in-store (Siewiorek and et.al., 2012). Businesses will adapt to
this norm and start to cater to the needs of the new generations and start to create online services
to maximize profits.
Political factors- Political factors may be related to the government. They consist of
legislative bills, tax policies, health and safety laws, and government stability. The average
businessman can’t lower taxes or introduce new legislation that’ll affect the entire economy.
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They must instead understand these factors on a grand level and ensure their business aligns to
laws, regulations, and policies. Political factors include the following types of instrument:
Legislation such as the minimum wage or anti discrimination laws.
Voluntary codes and practices
Market regulations
Trade agreements, tariffs or restrictions
Tax levies and tax breaks
Type of government regime e.g. communist, democratic, dictatorship.
Legal factors- Legal and Regulatory Factors Affecting Business. The legal and
regulatory environment plays a very crucial role in determining the success of any businesses.
The government imposes taxes among other regulatory measures to promote economic growth
and to cushion consumers from exploitation (Chavis, Klapper and Love, 2011). Legislative
changes occur from time to time and many of them affect the business environment. For
example, if a regulatory body would set up a regulation for the industries, then that law would
impact all the industries and business that strife in that economy, therefore businesses also
analyse the legal developments happening in their environment.
CONCLUSION
It has been concluded from the above report business environment is a combination of
two environment such as internal as well as external. In this report, there is a discussion about
the two large retail companies Sainsbury and Tesco. In this report mentions about the types of
business and their different purposes. For every business firm, their stakeholders are very
important such as customers, employees, shareholders, suppliers etc. Sometimes the external
factors environment affect on business activities and factors are political, social and legal. These
are not controllable by the business firm.
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REFERENCES
Books and Journals
Babatunde, B.O. and Adebisi, A.O., 2012. Strategic Environmental Scanning and Organization
Performance in a Competitive Business Environment.Economic Insights-Trends &
Challenges.64(1).
Chavis, L.W., Klapper, L.F. and Love, I., 2011. The impact of the business environment on
young firm financing.The world bank economic review.25(3). pp.486-507.
Chow, A.T and at.al.,2011.Broadband network with enterprise wireless communication system
for residential and business environment. U.S. Patent 7,944,948.
Craig, T. and Campbell, D., 2012.Organisations and the business environment. Routledge.
Fernando, A.C., 2011.Business environment. Pearson Education India.
Gecevska, Vand et. al., 2010. Product lifecycle management through innovative and competitive
business environment.Journal of Industrial Engineering and Management.3(2). pp.323-
336.
Hamilton, L. and Webster, P., 2015.The international business environment. Oxford University
Press, USA.
Iskanius, P., Page, T. and Anbuudayasankar, S.P., 2010. The traditional industry sector in the
changing business environment–a case study of the Finnish steel product
industry.International Journal of Electronic Customer Relationship Management.4(4).
pp.395-414.
Pulver, S., 2012. Business and the Environment.
Siewiorek, A and et.al., 2012. Learning leadership skills in a simulated business
environment.Computers & Education.58(1). pp.121-135.
Online
International Business Environment & Governance, 2017. [Online]. Available through:
<https://www.eur.nl/euc/academics/curriculum/course_list/300_level/
international_business_environment_governance/>. [Accessed on 21st August 2017]
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