Impact and Influence of Macro Environment on Business Strategy

This report discusses the impact and influence of macro environment on business strategy, with a focus on Sainsbury's. It explores the analysis of internal environment and capabilities, and evaluates the application of Porter's Five Forces. The report also includes strategic planning for Sainsbury's.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
Impact and Influence of Macro Environment..............................................................................3
LO2..................................................................................................................................................6
Analysis of Internal Environment and Capabilities.....................................................................6
LO3................................................................................................................................................10
Evaluation and Application of Porter’s Five Forces..................................................................10
LO4................................................................................................................................................12
Strategic Planning for Sainsbury’s............................................................................................12
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Business strategy can be defined as course of actions which is designed to help in
carrying out functions to achieve business objectives. Strategies are very important as they insure
success of the business activities in form of achieving business objectives. This is because
strategies of the business are developed after analysis of various factors that might affect the
success of the business functions and activities. Factors that are analysed in developing strategies
are macro environmental factors affecting business, micro environmental factors affecting
business and internal factors that can affect business and its success. Factors of the environment
for business has been divided in two types these are external and internal. External factors again
divided in micro and macro factors of the business environment. This report will discuss about
what the macro and micro factors that affect business are and how strategies can be based on the
--analysis of these factors. This report contextualises Sainsbury’s for discussion of business
strategy. Sainsbury’s is a chain of supermarket in the UK. Company was founded in 1896 and is
headquartered at London, UK. Sainsbury’s operates in retail industry and serves around 2400
locations across UK. This report will includes devising a strategic management plan for
Sainsbury’s so that on the basis of internal and external analysis.
LO1
Impact and Influence of Macro Environment
Macro environment factors make significant impact on the functioning of the business.
This is very important for Sainsbury’s that it analyses its impact on timely basis because the
factors that exist in macro environment are completely uncontrollable and timely identification
and analysis of their impact and influence can help organisations in developing strategies to deal
with the impact of external environmental factors. External environment can make direct impact
on realising vision of the company. In context of Sainsbury’s its
Vision-
‘To help customers to live for less’

This means that vision of the Sainsbury’s is to ensure that customers get easy and
affordable access they need; healthy food, quality clothing, stylish homewares and latest
technology.
Mission
‘To be consumers’ first choice for food, delivering products of outstanding quality and
great service at a competitive cost through working faster, simpler and together’.
Mission statement is considered to be a way through which companies can realise their
vision.
Objectives
Environmental management system- managing environmental system over which company
has direct control
Own brand products and suppliers- Influence suppliers to reduce their direct environmental
impact and improve environmental quality
Transport- Increasing the efficiency of transporting product, and address employees and
customer travel with aim of reducing CO2 emission
Energy- Reducing CO2 emission from energy consumption
These objectives of the Sainsbury’s are based on focus of the company on the
environment and its protection (Guo and Wang, 2019). Company includes practicing
environment friendly practices do that it can reduce its negative impact on the environment.
The impact that macro environment make on the practices of the company can be
analysed through application of PESTLE Framework for environment analysis. This is as
follows-
Political Factors
The issue of Brexit has set serious consequences for the companies who are dealing in
chains of supermarket business. The decision that the country has taken of leaving the market of

UK will affect their strategies and affordability to import goods from abroad. Also this will make
the products costlier for the end user. In order to increase their level of profits they need to put
more of their efforts so that consumers spend more on their products. (Yuliansyah, Gurd and
Mohamed, 2017). Changes in prices will influence the business in a negative manner and their
strategy may not work.
Economic Factors
These factors are concerned with the rate of inflation, GDP of the country, level of
employment etc. due to rising in the cost of fuel the cost of transportation has increased which is
affecting the margin of Sainsbury as it is already less. In order to maintain this they will need to
increase the prices of their products but overall it will reduce the profitability of the company.
Other than this expectations of the employees of the company is rising in terms of increasing
their salaries. This will again increase the expenses of the company which they have to pass it on
to consumers through which sales of the company will be affected. It is necessary that the
company innovates continuously as they face a lot of competition from the segment leaders in
the market such as Tesco, Asda etc. Other than this due to the pandemic of Corona Virus disease
all the businesses has been shut down and people are not allowed to roam freely which is
affecting the sales of the company as many of the customers of the company have not earned at
the time of pandemic and this will lead to many failure of jobs in the company.
Social Factors
These factors are concerned with culture, differences in beliefs, change in trends. For
instance nowadays people don’t prefer junk food instead they are switching to healthy food as
everyone is concerned of their health. It is necessary that the company provides goods according
to these measures so that they can remain in competition among all. Also there has been an
initiative which goes by fair trade movement it states that consumers must pay extra for the
product so that farmers can get fair prices for their produce. Mostly it works for the products
which are related to chocolates and coffee but the reach of this aspect is widespread among all
type of products (Holotiuk and Beimborn, 2017).
Technological Factors

These factors are used so that they can company can keep up with the advanced and
innovative methods used in the business. It involves aspects such a big data analytics and
artificial intelligence. These aspects are helping Sainsbury to gain more knowledge in the area
they serve in. These aspects will help to know the model of the business in a accurate manner
and help the company to take out its expected sale in the market. If these techniques are
developed and used correctively then it will increase the profits of Sainsbury. Other than this
these aspects has helped the company to sell their products online which is an more convenient
option for the consumers. It is up to them that at what extent they take the use of these platforms.
Legal Factor
There are several ways in which legal factor can make impact on the Sainsbury’s this is
because legal factor is that factor that governs operations and functioning of the company. Legal
factor includes laws and regulations that company is required to adhere to in its practices. This is
important for Sainsbury’s that it adhere to these legal factors to ensure that its practices and legal
and valid. In case Sainsbury’s fails to do so this will make impact in form of legal actions taken
against it. Some of the elements that affect Sainsbury’s in this factor are food safety, consumer
protection etc. and changes in this are very unpredictable and Sainsbury’s need to ensure that it
can adhere to all the changes in it and also include impact on its strategic management. If the
company do not work on these basis then their business will suffer from a negative brand image.
Environmental Factor
This is presently one of the important factors affecting the business organisation.
regarding Sainsbury’s it has volunteered in improving its practices to ensure that they are
environment friendly and make least negative impact on the environment (Witkowski, Cheba
and Kiba-Janiak, 2017). Some of the elements in this are waste management, environment
sustainability and reduction in carbon emission. Sainsbury’s have managed to indulge
environmental elements and factors in its strategies for business so that it can function
accordingly.
Overall factors such as decision of Brexit or the pandemic of Covid-19 affects the business and
the actions taken by the company which reduces the level of opportunity and their rate of
sustainability in the market.

LO2
Analysis of Internal Environment and Capabilities
External environment and capabilities of the organisation are very important as they
enable organisation to utilize the opportunities that exist in the external environment and also to
prepare organisation to deal with threats of the external environment. This also play vital role in
determination of success and failure of the Sainsbury’s (Ukkas and et.al., 2019). Every
organisation has their its internal environment which mainly consist of factors like policies,
structure, people, values and objectives. Capabilities of the organisation also lie within these
internal factors and resources that Sainsbury’s employs for its functioning and these are also
important for strategic planning of the company. The internal environment of the Sainsbury’s
and capabilities can be analysed through VRIO Model of resource and capabilities analysis.
VRIO Model
This model is based on four elements which suggest whether resource of the organisation
is capability of the organisation or not. This can be measured on the basis of the elements that are
valuable, rare, inimitable and organised.
Valuable- This means that resources and Capabilities of the Sainsbury’s are of value whether
they are tangible or intangible they have capability to add value in organisational operations and
its functioning.
Rare- This means that resources are not available everywhere so that they can be easily
acquired. Resources those are rarely available and it is not easy for competitors of Sainsbury’s to
acquire those resources.
Inimitable- This means that reasources and capabilities of the organisation cannot be imitated
and in case they can be imitated by competitors of Sainsbury’s they are costly to imitate. This
ensures that they will remain and will be imitated by only those who can expense high cost over
that (Vargas-Hernandez and Medrano, 2020). For example it will require huge monetary and
non-monetary resources to create and build a image and brand awareness that Sainsbury’s has.
Organised- To ensure that all the resources are able to properly perform this is important that
they are properly organised. For example- it is important to organise human resources with

material resources properly so that they can perform their operations and functions allowing
company to get utmost benefit of its human resources.
Resource Valuable Rare Inimitable Organised
Human Resource Yes No No Yes
Financial resources Yes No No
Online shopping Yes No Yes Yes
Market position Yes Yes No Yes
Brand awareness Yes Yes Yes Yes
Customer rating Yes No No Yes
Supply chain Yes Yes No Yes
Above mentioned resources are resources that are very important for successful
operations of the Sainsbury’s and they can act as capabilities of the company when they possess
all the four elements of valuable, rare, inimitable and organised. Among all the resources neither
of the resources except brand awareness of Sainsbury’s possesses all the four elements in it but
online shopping experience and technology is one of the capability as this has three elements,
similarly market position, brand awareness and supply chain of the company are some other
resources that act as capability for the Sainsbury’s (Vargas-Hernández and Garcia, 2019). Brand
awareness of the company is valuable, rare, and inimitable and organised resource and capability
of the company. This is because Sainsbury’s very popular among people of UK and this is
because of its long time and wide spread existence in UK.
These resources with all these four elements and with three elements are not just capabilities that
Sainsbury’s that Sainsbury’s possess but are also its strength that can enable it to take advantage
in competition and utilize all the available opportunities.
Internal Environment of the Sainsbury’s can be analysed through SWOT analysis. This
analyses four factors that are;
Strength
 Innovative promotional strategy (promotion are important and Sainsbury’s promotional
strategy works as one of the strength of the company)

 Position in retail industry (position of Sainsbury’s in UK retail industry is one of its
strength)
 Expansion moves of the Sainsbury’s (expansion moves of the company have also proved
to be a strength for the Sainsbury’s. This is because company expanded from food to non-
food product (Bull and et.al., 2016)
 Its online platform for retailing (online platform of Sainsbury’s is also effective and
provide variety to its customers in terms of channels of shopping)
 Acquisition of the Sainsbury’s importantly with Argos (this has proven to be important
and successful strategic move by the company)
Weakness
 Low margin (this is weakness for the company that their margins are low which reduces
its overall profitability)
 Increasing cost of operations
 Strong competition (Tesco, Aldi has strong competition for Sainsbury’s)
 Declining sales of the company (this is another weakness of Sainsbury’s as it can manage
its profitability even at low margin but sales decline can affect its profitability negatively)
 High attrition rate of workforce
 Limited success outside core business
Opportunities
 Expansion of Sainsbury’s out of UK
 New trends in consumer behaviour (frequently changing consumer trends provides an
effective opportunity to Sainsbury’s and it can ensure to utilize this opportunity by
developing capability to respond fast to the changes)
 Attraction of customers from online platforms of the Sainsbury’s

 Environmental focus of the company
Threats
 Limited and seasonal demand of highly profitable products
 Technological development by the competitors
 Limitation of skilled workforce
 Increasing pay level of the employees
Mainly strength and weakness are part of internal analysis and suggest that Sainsbury’s have
several strength and weaknesses. In such situation to maintain that its strength remains strength
and favourable for company it needs to work on these and improve the strength. Strengths are
important to utilize opportunities that are available and many times can be used as a measure to
deal with and restrict impact of threats (Blockeel and et.al., 2016). Weaknesses are important to
remove as they can become barrier in utilization of opportunities and can enhance and increase
impact of threats on Sainsbury’s.
LO3
Evaluation and Application of Porter’s Five Forces
Porter’s five forces model is a model which analyses micro environment and competitive
environment of the business. This model includes five forces that are;
Threat of Substitute
This is the threat that company possess from those organisations which deal in substitute
product. Substitute product is the product which can be used in place of a given product. In
context of Sainsbury’s it is a retail company and its products can be replaced by another
company products. The difference in its substitute is that customer when substitute its product
they change the complete store for the purchase of retail items. Threat and power of the company
in this force depends of the number of substitutes and price of switching the product and
similarities and qualities of the product (Moreno-Izquierdo, Ramón-Rodríguez and Perles-Ribes,

2016). Sainsbury’s is second largest chain in UK and this suggests that its position in this
competitive strength is strong. But as there are several products and choices are available in retail
industry Sainsbury’s requires to make significant efforts to ensure its strong position.
Threat of new entry
This is the threat which is concerned with entry of new firm in the industry and as
Sainsbury’s operate in retail industry its threats are concerned with entry of the firm in retail
industry. This gets affected by entry barriers in the industry, entry barriers refers to barriers
which are created so that firms cannot enter into the industry. These are in form of resources
required for entering into industry. These resources are required in high quantity or are not easily
available creates barriers to entry in the industry. Sainsbury’s is a retail organisation and
resources required for this are not very difficult to acquire and when firm enter at small level
quantity of resources required is also limited but to enter in the industry at a level where
Sainsbury’s operates requires resources and this is not easy to enter at this level (Nguyen, 2017).
In terms of this force of the competition position of Sainsbury’s is strong.
Bargaining Power of Buyers
Buyers are most important for a firm in order to ensure its survival and growth of the firm
is also based on buyers. Presently in a consumer centric business environment buyers have
become centre of all the functions of the company. But this force also gets affected by number of
buyers and sellers and cost of switching the seller for buyer. Sainsbury’s has managed to secure a
moderate position in this because number of buyers are many but along with sellers are also
several in the industry (Zhang, Leng and Zhou, 2020). Sainsbury’s also provides high quality
product and services at moderate and affordable rates and this is also one of the reason that
position of the company is well recognised.
Bargaining power of suppliers
Suppliers are those who supply required resources and material to organisation so that
they can function properly and with adequate resources. This is the power that suppliers hold this
gets affected by number of suppliers and resources that are supplied by suppliers. In terms of
number of suppliers are there are plenty of suppliers who can supply resources to Sainsbury’s

and resources that are required for Sainsbury’s as a retail industry are also not very unique
(Chenyu and Wen, 2016). Along with this cost of switching is also not very significant and if
decisions are made properly Sainsbury’s can also look for a better and less costly alternative of
the suppliers. This suggests that position of the Sainsbury’s was strong in this force.
Industry Rivalry
This refers to rivalry that among existing firms of the industry. This is affected by
number of firms in the industry and in the industry where Sainsbury’s operate there are several
firms operating and this is why Sainsbury’s faces strong rivalry. There are some of the firms that
give strong competition to Sainsbury’s such as Tesco, Marks and Spencer, ALDI (Huang, 2019).
Though Sainsbury’s has managed to retain its top position and this suggests that company has
strong position in this force.
On the basis of the discussion it can be concluded that overall position of the Sainsbury’s
is strong in the retail industry. There are several factors that ensure high position of the company
and among them high quality of products and services on affordable price is one of the reason for
its strong position in the competitive force. Along with company also have favourable elements
in other forces that contribute in its strong position in the industry. There are some of the
measures and strategies that company can take to ensure that its position gets strengthen and also
it remains at its existing position. These are;
 Sainsbury’s is has included its environmental concern in its strategies and Sainsbury’s
should include them in its marketing and promotion as well. This will strengthen its
position in buyers power as environmental friendly organisations are being given more
preference by the buyers.
 Sainsbury’s is second largest retail chain in UK and it should use this position and
expand its business out of UK (Kibria, Al Amin and Rifat, 2017). Company can use this
for its success in expansion.
These are some of the strategies and measures that Sainsbury’s can take in order to retain its
strong position and as well as to strengthen the position that it holds currently.

LO4
Strategic Planning for Sainsbury’s
Strategic planning of the organisation assists with realising its vision and objectives more
effectively. Above discussion involved discussion over internal and external environmental
factors of Sainsbury’s (Papke-Shields and Boyer-Wright, 2017). This heading will include
strategic planning for Sainsbury’s on the basis of environment analysis in order to ensure future
survival in competition and its growth.
Vision
‘To be first choice and best choice for customers in terms of price and quality’
Mission
‘To ensure effectiveness of operations in online and offline platforms’
Objectives
 To increase the market share by 10% by the end of current financial year
 To increase profit margin by reducing cost of the operations by 15% within current
financial year
 To increase product availability on online platform by 25% to ensure that customers can
get what they need through online platform
Strategic directions available for Sainsbury’s can be identified through Porter’s Generic
strategies;

Figure 1Porter's Generic Strategies
The above figure shows strategic directions that are available for Sainsbury’s these strategies are;
Cost leadership- This strategy includes that company operates at lowest possible cost in the
industry and this provides it cost advantage and enables company to sell its products at less price
compared to competitors (Islami, Mustafa and Latkovikj, 2020).
Differentiation- This means that Sainsbury’s includes in its strategy and operates with a visible
differentiation. Differentiation ensures that Sainsbury’s products are unique and different from
those of its competitors.
Cost Focus- This is another strategic direction available to Sainsbury’s in this company can
reduce its cost and focus on a specific customer group with this price. For example- Sainsbury’s
provide its food items at lowest possible cost in the industry (Firoz Suleman, Rashidirad and
Firoz Suleman, 2019).
Differentiation Focus- This is another strategic direction that company applies its differentiation
strategy to a specific customer group or come with only specific item which is different than
others.

Among all the strategic direction the one that is most suitable for Sainsbury’s is
differentiation and cost focus applied together. This is because in case company apply cost
strategy to all market and products it will create doubts on the quality of the products. Other than
this if Sainsbury’s applies differentiation it broad scope this will increase cost and product of the
company which might affect affordability of Sainsbury’s products. This will Sainsbury’s can
apply cost focus to some of the products that customers expect to be available at less price and to
apply differentiation focus to the product which customers prefer to be unique and exclusive.
Other than this Bowman’s Strategic Clock is one of the model that provides strategic
direction to company. This is as follows-
Figure 2Bowman's Strategic Clock
This model for strategic direction is also based on price and differentiation. Strategic directions
in this model are;
Low price and low added value- This strategy includes keeping the price relatively low as to the
price of competitors price (Desai, 2019).
Low price- Sainsbury’s in this strategy will require to produce large quantities and also the
products are valued at target market.
Hybrid- This means Sainsbury’s focuses on differentiation of products along with focuses on low
price of the product.

Differentiation- This means products of Sainsbury’s are high in quality as well as they are able to
provide highest level of perceived value.
Focused Differentiation- This means that company and brand focus on luxury and exclusive
products that are available at high price.
Risky high margin- This means that Sainsbury’s charges high prices for the products that are
perceived by customers to be mediocre (Haselwanter, Muskat and Zehrer, 2016).
Monopoly pricing- This strategy includes that company position it as leader in monopoly and
charges price accordingly.
Loss of market share- This means that company is not able to provide products and services that
are valued by the customers.
This strategy is also based on price and differentiation and as the name hybrid has been
given to strategy Sainsbury’s can opt for this strategy for its success and future survival in
competition.
On the basis of selected strategic direction for Sainsbury’s its Marketing Mix can be as follows-
Product- on the basis of customer preference some of the products of the company will be
exclusive and showing clear differentiation from competitors’ products and other will remain as
they were earlier (Wu and Li, 2018).
Place- product will be available at both platforms online and offline and company will increase
availability of the products on its online platform.
Price- Price of the products in the new strategy of the company will be less of the products
falling under cost focus and those falling under differentiation strategy will be charged relatively
high because of their added value yet affordable for customers.
Promotion- The new strategy will also adopt promotion as this was earlier (Blut, Teller and
Floh, 2018). This will be a mix of traditional and modern promotional strategies of online and
offline channels.

CONCLUSION
On the basis of above discussion it can be concluded that environment plays very
important role in ensuring success and failures of all the efforts that company make. This report
discussed about environment of the Sainsbury’s and all the three types of environment mainly
divided in two types’ present different opportunities and challenges for the company. In its
external environment macro environment of the company was analysed through the framework
which is known as PESTLE analysis and micro and competitive analysis of the company was
analysed through Porter’s Five Forces. Internal environment of the company was analysed with
the help of VRIO framework and SWOT analysis model. This model analyses strength and
weaknesses of the company and also contributes in identification of opportunities and threats that
company might have. Lastly, based on the analysis of environment for the company strategic
plan was designed and devised so that company can opt to correct and most suitable strategic
plan to ensure its future survival and growth in competition.

REFERENCES
Books and Journals
Blockeel, C and et.al., 2016. A fresh look at the freeze-all protocol: a SWOT analysis. Human
reproduction. 31(3). pp.491-497.
Blut, M., Teller, C. and Floh, A., 2018. Testing retail marketing-mix effects on patronage: A
meta-analysis. Journal of Retailing. 94(2). pp.113-135.
Bull, J.W and et.al., 2016. Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis
of the ecosystem services framework. Ecosystem services. 17. pp.99-111.
Chenyu, F. and Wen, X., 2016. Analysis of Development Strategies of Online Pharmacies in
China Based on Michael Porter's Five Forces Model. Chinese Pharmaceutical Affairs.
(11). p.6.
Desai, C., 2019. Strategy and Strategic Management'. Management for Scientists. Emerald
Publishing Limited, pp.65-84.
Firoz Suleman, M., Rashidirad, M. and Firoz Suleman, S., 2019. The applicability of Porter's
generic strategies in pure online firms: A case study approach. Strategic Change. 28(3).
pp.167-176.
Guo, L. and Wang, Z., 2019. Ratio analysis of J Sainsbury plc financial performance between
2015 and 2018 in comparison with Tesco and Morrisons. American Journal of
Industrial and Business Management. 9(2). pp.325-341.
Haselwanter, S., Muskat, B. and Zehrer, A., 2016. Strategic Planning in Micro Businesses:
Adapting the Strategic Clock for Micro Firms.
Holotiuk, F. and Beimborn, D., 2017. Critical success factors of digital business strategy.
Huang, Y., 2019, December. Strategic Environment Analysis of Logistics Enterprise based on
SWOT-PEST-Michael Porter's Five Forces Model--Taking SF Express as an Example.
In 2nd International Symposium on Social Science and Management Innovation (SSMI
2019). Atlantis Press.
Islami, X., Mustafa, N. and Latkovikj, M.T., 2020. Linking Porter’s generic strategies to firm
performance. Future Business Journal. 6(1). p.3.
Kibria, M.G., Al Amin, M. and Rifat, U.A., 2017, September. Application of Porter’s Five
Forces Model in Battery Manufacturing Industries of Bangladesh. In International
Conference on Mechanical, Industrial and Energy Engineering. Retrieved (Vol. 25).
Moreno-Izquierdo, L., Ramón-Rodríguez, A.B. and Perles-Ribes, J.F., 2016. Pricing strategies of
the European low-cost carriers explained using Porter's Five Forces Model. Tourism
Economics. 22(2). pp.293-310.

Nguyen, T.T., 2017. Management education as an industry and MBA as a product: revisiting
joint MBA programs using Porters five forces model. Global Business and Economics
Review. 19(3). pp.356-377.
Papke-Shields, K.E. and Boyer-Wright, K.M., 2017. Strategic planning characteristics applied to
project management. International Journal of Project Management, 35(2), pp.169-179.
Ukkas, I and et.al., 2019, October. The analysis of human resource quality in improving
employees performance: An analysis of external and internal environment. In IOP
Conference Series: Earth and Environmental Science (Vol. 343, No. 1, p. 012158). IOP
Publishing.
Vargas-Hernández, J.G. and Garcia, F.C., 2019. The Link between a Firm´ s Internal
Characteristics and Performance: GPTW & VRIO Dimension
Analysis. REBRAE. 12(1). pp.19-30.
Vargas-Hernandez, J.G. and Medrano, M.D.J.M., 2020. The Circular Economy: Analysis Based
on The Theory of Resources and Capabilities. Revista Livre de Sustentabilidade e
Empreendedorismo. 5(2). pp.178-196.
Witkowski, J., Cheba, K. and Kiba-Janiak, M., 2017. The macro-and micro-environmental
factors of decisions of production facility location by Japanese companies in Poland.
In Forum Scientiae Oeconomia (Vol. 5, No. 1, pp. 43-56).
Wu, Y.L. and Li, E.Y., 2018. Marketing mix, customer value, and customer loyalty in social
commerce. Internet Research.
Yuliansyah, Y., Gurd, B. and Mohamed, N., 2017. The significant of business strategy in
improving organizational performance. Humanomics.
Zhang, C., Leng, M. and Zhou, L., 2020. DEVELOPING STRATEGIES OF SOCIAL
ENTERPRISES EXPLAINED USING PORTER'S FIVE FORCES ANALYSIS
MODEL: TAKING MENTAL CHALLENGED CAR WASH AS AN
EXAMPLE. International Journal of Organizational Innovation. 12(3).