Pestle Analysis Business Environment: PDF

BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1 Different type and purpose of organisation.......................................................................1
P2 Size and scope of different organisation...........................................................................2
P3 Relationship between different organisation function of SAINSBURY.........................4
LO 3.................................................................................................................................................6
P4 Positive and negative impact of macro environment on SAINSBURY............................6
LO 4.................................................................................................................................................8
P5 internal and external analyses...........................................................................................8
P6 interrelationship between internal and macro factors:.............................................10
CONCLUSION..............................................................................................................................11
REFERENCE.................................................................................................................................12

INTRODUCTION
Organisation has different differ size, scope and capabilities which influence their decision
regarding expansion and diversification. This study describes different type of organisation and
their purpose , it also gives detail about interrelationship between different functional unit of
organisation like finance, HR, and marketing department. Present study also give insight about
the way these functional units mutually contribute the organisation objectives. PESTLE is done
to know the positive and negative affect of external factor on SAINSBURY' business activities.
SAINSBURY is the well know supermarket store, established in1869. Its is ranked as second
largest chain in UK. This study also give idea about SAINSBURY different functional unit and
their work.
LO 1
P1 Different type and purpose of organisation
An organisation can be categorised on the basis of its size, purpose, structure, activities.
This differentiation gives a brief introduction about organisation. For instance if a company has
PLC in the end of its name, then stakeholder can recognise it as private limited company and
they also correlate the characteristics of private limited with this organisation.
Public sector organisation get its fund from government ,which is collected in the form
tax, financial transfers and fees. All the business decision are taken by the government only.
Main purpose of these organisations is to work for public interest and welfare. Public sector
organisation produce basis essential items to every section of society, it also makes extra effort
for weaker section so that they can fulfil at least their basic needs. Example of public sector
service are Education , Infrastructure, Emergency Services, Gas and Oil, Public, Electricity these
organisations are accountable to public because it uses their money. These can be find at three
level I.e. central level, state level and local level. Public sector can make partnership with private
companies(PPP) to outsource some work or to maintain the quality of work and service.
(Camisón. and Villar-López, 2014)
Private sector :It is the part of the economy in which the organisation must be run by the
individual it would not be rather run by the government. The private sector organisation must be
run with aim of the making profit and increases there business in the markets. There is a great
example of the private sector Sainsbury organisation it is the second largest organisation in the
super market limited which was engaged in grocery and related product. The name of the
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organisation is Burg-in Hall 921 limited but it was change in 1997 and named as Sainsbury. This
company was founded in 1869 in London(Harper, C., 2015)
Voluntary sector: Voluntary sector also known as community sector and third sector.
These organisations are not controlled by government, it is kind of private organisation which do
not have profit making objective. Prime purpose of this sector is to full fill the social care need,
these organisations use its retain earning for acquire more sources, not to distribute profit in
stakeholders for instance an educational NGO have 10% profit in particular year ,it will use this
profit to acquire new books, table, uniform to students. Government gives privileged as tax
rebate and incentives because of their social welfare objective. Type of third sector are charities,
foundations, advocacy groups, faith based organisations, Social Welfare Organizations,
recreational sports, community group etc. it does not follow recruitment and selection as private
sector , it gets its staff as volunteers who have interest in social welfare. These volunteers work
for free or get minimum amount as salary. Voluntary organisations have high accountability
towards society(Mazzucato, 2015).Trustee makes vision and mission statement of voluntary
organisation. Board insures that organisation's assets and financial resource are used as per their
social welfare objective not for personal goals. Board periodically checks charity activities are
aligned with governing document and laws or not( Camisón. and Villar-López, 2014).CEO
provide leadership to staff. Executive board is responsible to make execution plan for
organisation vision and mission. This board work as bridge between trustee and voluntaries.
P2 Size and scope of different organisation
Size of organisation comprises its financial condition, market share, human capital and
tangible assets like machine, land , manufacture units etc. if an organisation has large size it also
has large scope to expend its market future, where a small size company can not expand its
business after one limit because of lack of resources. It's not about reduces sometime
organisation have resources but it can make expansion decision because of internal and external
limitation and government control over it. Organisation strength and weakness also affect the
scope of organisation for instance BBC has old reputation and image which increase its scope
for diversification where SAINSBURY's global presence help it to expand its market.
Organisation which have large efficient human capital have more chances to get success rather
than large but inefficient human capital.(Harper, C., 2015)
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BBC founded in 1922, having net income of £129.1 million. Number of employees are
20,916 BBC get its fund and information from British government. Public sector organisations
have great opportunity to expand its service area because it is supported by government
financially and non financially. These organisations have all the required information. Public
sector organisation do not face borrowing problem because stakeholder have faith in government
and they are assured regarding return. BBC is well known public sector broadcasting service
provider. BBC has advantage of old goodwill and reputation and sound financial support from
government. Public sector expansion plan has one major limitation that it can not expand its
business for personal interest and for profit making. Any public organisation has to consult with
government for every strategic decision. It can not diversify its business as private sector does,
because it is accountable to public so ,it can not take huge risk on public money. It has to insure
adequate return for shareholder. Public sector are more affected by internal factor(SWOT) which
limits the scope and expansion capacity of organisation. For instance many government sector
employee have low computer literacy which hurt the R&D function.( Mazzucato, 2015)
SAINSBURY founded in 1869, having net income of 309 million and employee are
186,900. its provide grocery and cloths across the UK. Private sector organisation have
autonomy in its business decision making so it can take speedy decision regarding expansion and
diversification. Private sector companies used its retain earning for further growth so it has
adequate money for research, development and innovation which enhance its insight for
improvement the customer satisfaction experience. SAINSBURY is not accountable to public
welfare , it is only accountable to its shareholder , which allow it to do more marketing and
competitors advantage tactics. Private sector company has efficiency in its business activities and
decision but it can face problem to raise borrowing fund because shareholders have less faith
and trust on these, to grab the faith and trust of customer private organisations has to offer high
dividend to shareholder , which lower its profit margin. These organisations extremely effect
external factor of business environment which limit its scope. For instance private sector can not
diversify its business which is prohibited by government and its has to make its decision in legal
framework .
NHS Establish in 1948,691,000 employees registered in the UK. NHS offer medical
care like surgery, mental health assistance, free wheelchair for social cause. Voluntary sector or
third sector have the least opportunity to increase its scope because these organisations do not
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large profit margin. Profits which is earned by these sector companies is reinvested in purchasing
assets and facility for daily purpose, although government provide some financial and other
assistance to support these , but is not sufficient for taking any big business decision, apart from
it volunteers work here as per their interest and social welfare feeling, which is also not optimum
for R&D activities. Third sector can help the government as facilitate information regarding
social need, collaboration with government for charitable works, volunteers supply in case of
natural disaster and any emergency. Unsound financial capital and inefficient weaken its scope
but helping nature and welfare spirit, contributes in filling the gap arise due to unequal income
and opportunity distribution.(Ismail. and King, 2014)
Small size organisation easy to control and manage as it has limited function, product and
geographical area. So these organisations use informal structure. Large size organisation need
more control, accountability and so these organisations opt vertical, maxtrix and open boundary
structures. Scope is known as possibility of growth. Scope can be divided into two parts as
product and project. An organisation having focus on product development mostly choose
Matrix organizational structures where project base companies follows Vertical structures.
P3 Relationship between different organisation function of SAINSBURY
Organisation function carried out different activities and process which helps an
organisation perform its business function smoothly so that it can achieve its objective. These
actives are different in different department of SAINSBURY as per their role and responsibility
in organisation. These functional unit include human resources, marketing, finance,
warehousing, information technology, operation etc., although they have differed role but they
depended on each other for resources and information.
Finance and marketing department have the closest relation with each other because they
can not do a single work without mutual support. Marketing department depends on finance
department for budget, project feasibility analysis and cost management. For instance marketing
department of SAINSBURY makes its marketing plan like promotion and advertisement based
upon allotted budget, which helps marketing team to keeps itself in budget, finance department
analyse sale report and set future sale target, also evaluate the performance of marketing team
and its efforts with different ratio analysis like income and expenditure radio. Marketing
department bring cash inflow in organisation with its marketing efforts , which is used by finance
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department for dividend payment, salary, bonus and other monetary benefits and expenses.
( Botha, Kourie. and Snyman, 2014)
Marketing department of sainsbury help its human resources' department to define the
job role and responsibility for future recruitment and selection. These job skill and experience
requirements are given to HR based upon market research and experience apart from it
SAINSBURY got its brand name and image because of marketing team effort which helps H.R
to avail the best talent form market. H.R department supplies well trained human capital to
marketing department, HR also conduct customised training and development programme which
give support to marketing department in strengthen its team and increase their efficiency.(Chen
and et.al., 2014)
Information technology department integration with every function unit of organisation
become more prominent with changing time. IT provides information and solutions to almost
every department for instance marketing department depend on IT cell for E- marketing efforts
like marketing via social media, website, phone, e brochures etc. human resource department get
large useful recruitment pool through automatic shorting of useless applications, data base hiring
tactics etc. I.T also provide help HR to manage record with help of software. This relation can be
understand by this example: SAINSBURY's marketing manager shared problem of long queue
with I.T department and IT cell develop mobile self check out application to solve the issue.
Production, warehousing and logistic department depend on marketing depatmnet for customer
demand and preference information so that they can make requirement improvement and
innovation in product and service. For instance SAINSBURY's production changed its
packaging from standard and traditional packing to customised and environmental friendly
packing. SAINSBURY's adopt RFID in logistic and warehousing because marketing team
observe that customer demands fresh food. Marketing department get help from production
department to get right product on right time with right quality which help in build brand image
and customer satisfaction function of marketing. Production department depend upon efficient
warehousing activities like shipment, Assembling, installations so that product can be deliver to
customer with maintained quality. For instance SAINSBURY's use Hazard analysis and critical
control points for perishable food product.(Pee. and Kankanhalli, 2016))
Interrelation of each functional unit of SAINSBURY creates a mutual understanding for
achieving the common goal, all department feel attached toward organisation vision and mission.
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Errors, defect and inefficiency of any department can be easily indefinites, I.e if finance
department have lack of money, than marketing department's performance can be questions.
High work performance environment can be create because all the department know their role
and responsibility and they align their effort in form of co-operation and collaboration to achieve
organisational goal. Interrelation also weaken the decision taking autonomy of one department
and they become more depend on each other, sometime one department pass on accountability of
inefficiency to another department easily for instance SAINSBURY's marketing department fails
in meet the target, it can blame to production department for not making required innovation
which reduced the customer satisfaction, loyalty and eventually, lower the sale.
LO 3
P4 Positive and negative impact of macro environment on SAINSBURY
Macro environmental factor are inevitable guest of for any organisation. These factor
comprises political, economical, legal, technological, and environmental factors. These elements
can influence the strategic and tactical decision of SAINSBURY conduct PESTLE analysis so
that it can minimise the risk, because risk associate with external factor can not be control and
predict. Macro factor impact on organisation are given below
political factor
Political factor mainly known as government policy. Main aim of government to change
in its policy is to protect public interest and customer protection so, an organisation has to
change its decision to align its function with government objective. Positive political changes
like ease of doing business policy facilitate infrastructure , low income tax rate, less interest rate
helps SAINSBURY in making large profit. Political stability remove uncertainty and anxiety to
organisation. Government provides ready-made legal framework which is accepted buy all the
stakeholder, which help SAINSBURY to acquire human, financial capital and customer trust for
its product. Government has huge control over business decision making which loose the
autonomy in decision making, governmental orders can unproductive financial burden to
organisation for instance SAINSBURY has to pay heavy fine for customer complaints, even
when the compliant is false. Negative changes in tax rate affect the purchasing power of
customer and borrowing power and expansion decision of SAINSBURY. Recent political
change like BREXIT force compnaies to restructuring their organisation as given in case study.
(Pee. and Kankanhalli, , 2016)
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Economical factor
Economical factor are most sensitive factor for SAINSBURY because it has direct impact
on organisation and customer both. These factor can be broadly categories as demand and
supply, money and baking, economic growth and development, trade cycle and inflation or
recession. Banking changes like increase in interest lower the disposable income of customer
which eventually decrease the demand of customer for product and vice versa. High employment
opportunity, fair labour cost, positive human development index such as literacy rate , life
expectancy, education level standard of living, favourably support the SAINSBURY as support
in acquire skilled labour and increase demand and production for employed and educated
customer.
Technological factor
Technological improvement and updation helps SAINSBURY to take competitor
advantage as facilitate innovation in product and service to enhance the customer satisfaction,
technology also help in minimise the waste, time consuming in decision making and information
sharing, more automation reduces the lobar cost which affect the cost of product. For instance
SAINSBURY use AI augmented machine in its production department, RFID for logistic and
warehousing, CRM to maintain customer relation . Frequent changers in technology increase the
operation cost and maintenance cost of SAINSBURY, employee's dependency on technology,
interpersonal relationship with customer and business relation can be hurt due to lack of personal
and human touch in service.(Botha, Kourie. and Snyman, 2014)
Legal factor
Legal factor is bundle of rules, regulation and law's which an organisation has to follow.
SAINSBURY is obedient organisation regarding follow the legal obligations on it. An
organisation who follow the legal structure helps in getting the confidence and faith of all
stakeholder. For instance SAINSBURY's product have Allergen Labelling, Mandatory Nutrition
Labels under The Food Labelling Regulations 1996,it enhances the brand image and customer
faith on its product. Sometime these laws are misused by customers and lower the decision
autonomy in decision making of company. For instance SAINSBURY has to give salary and all
benefit to pregnant employee even when she is not contributing in business function, which
seems ethically right but it hurt the organisation financially. Employee looses their job by
restructuring decision taken by companies, which rise legal concern to firm because organisation
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can not throw its employee without giving considerable time to settle themselves in other places.
(Chen and et.al., 2014)
Social factor-
Social factor help SAINSBURY to avail more information about customer choice and
preference. SAINSBURY nor offer more health and organic food in its because UK face some
social issue like obesity, diabetes and life style disease These social factor also consist life style,
technological competence,age and value and belief commonly shared by UK population ,so
company make changes in its store decoration and technical facility arrangements and marketing
activities as per the social behaviour of people. These social affect the diversification and
expansion decision for instance SAINSBURY sometime get criticism to offer non veg food, but
animal welfare organisations.
Environmental factor-
SAINSBURY also get affected by environmental changes like global warming,
earthquake and hurricane, these changes force the company to opt more environmental friendly
activities like eco- friendly packaging, recycling and waste management. When an organisation
follow the environmental guidance, rules and regulation it helps it to raise its goodwill among
customer and customer also feel attach with organisation, where these extra environmental
efforts increase the operational cost for SAINSBURY. For instance company now provide eco
friendly bags which are 30% higher as compare of regular polythene bangs. Environmental
concern of govermenet put extra weigh on these companies to restructure their CSR policy.
LO 4
P5 internal and external analyses
SWOT analyses of SAINSBURY:
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Strength
 SAINSBURY one of the major
supermarket chains in UK
 it has human capital of more than 150000
employees
 skilled and experienced management
 listed on big stock exchanges like
London Stock Exchange and FTSE Index
 company Actively undertakes Corporate
Social Responsibility.
Weakness
 global rise in price of food products
have negatively impacted the sales
 it tough competition from other chains
 company failing in retaining the
customers
 Form has Inadequate investment in
Research and Development as
compared to rivals.
Opportunities
 SAINSBURY can expand its market
share by joint ventures or partnerships
with the new companies
 it has opportunity to Attracting new
customer through online gateways.
Threats
 Rise in price of raw materials can
affect profit margin of SAINSBURY.
 High wage movements are threats
because company has large lobar and
employee base.
 Currently Firm faces Technology
obsolescence.
Application of SWOT for SAINSBURY.
SAINSBURY has sound financial position which enable it to acquire outsourcing service
for remove the technical obstacle. Skilled employee help company to make joint ventures or
partnerships. Company has to work on its weakness because it can turn into threat in long term.
For instance if customer continuously fail in retain its customer than it will become threat to
company which lower its market share as well as company can lose its goodwill.
Porter’s five
1. Threats of New Entrants : SAINSBURY has high threat of new entrance because there
is low entry barrier impose in entering in retail industry.
2. Bargaining Power of Suppliers: SAINSBURY has so many option in supplier available
who can supply required quality material to company, it gives strength to company so
that it can negotiate with its supplier, and can easily switch the supplier in case of high
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price and compromised quality of raw material. Baring power of supplier is low in case
of SAINSBURY.
3. Bargaining Power of Buyers : barging power of customer is so strong, because
customer have so many options available which offer same quality product to customer
as SAINSBURY do.
4. Threats of Substitute Products and Services: thereat of substitute of this company is
very high. To tackle this SAINSBURY put more focus on service improvement, now
more research conducts by company to know the customer need so that product can fulfil
these need and customer get maximum satisfaction with its product only.
5. Rivalry among the Existing Competitors: retail industry is one the intense
industry,if SAINSBURY's competitor make changes in their pricing policy, it directly
affects the sale of company. To solve this problem company choose product
differentiation and collaboration with its competitors for large market size.
P6 interrelationship between internal and macro factors:
Adequate fund will help the SAINSBURY to meet the advance technology requirements.
Good relations with union will build Firm's image and will be able to cope up with political and
union related issues. Conducting the business operations with full law compliances will remove
unwanted government interventions. Efficient financial condition of company will depict growth
in industry which will be a contributing factor in country's growing GDP. Internal strength are
used to grab the opportunities and to minimise the macro environment factors effect
organisation. For instance if economy is in its depression phase than company has to lower the
price for customer. In this case cost of production remain same and companies profitability
decreases because of low price of product but SAINSBURY can bear this loss just because it
has enough fund. Sometimes changes in macro factor give opportunities for growth like
favourable technological changes helps company to open its chain in outside the country. For
instance now SAINSBURY doing its business in different country and CEO of company can get
information about performance on company in aby country on one click only. Integrated
information system and cloud information storage , CRM helps organisation in expand the
market as well as help in manage its cuter efficiently.
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CONCLUSION
From the above study it has been concluded that an organisation must know about its
strength and weakness before making expansion and diversification decision. An organisation
only can get its objectives when all the department has collaboration and co-operation which can
smoothly avail by integration of information. Information integration helps organisation in quick
decision making and reduce wastage .input information for PESTLE analysis must be accurate
otherwise whole output of analysis gets affected. to achieve ultimate objective of customer
satisfaction only can be achieve when organisation opt the latest technology and offer product as
per need of customer.
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REFERENCE
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