Understanding the Business Environment

This report discusses the business environment of Sainsburys, a leading retail company in the UK. It covers the company background, factors of the external environment, competitive structure of the market, stakeholder analysis, and more.

Understanding the Business
Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Company Background.................................................................................................................3
Factors of External Environment.................................................................................................4
Competitive Structure of the Market...........................................................................................5
Stakeholder Analysis...................................................................................................................7
National Economic System..........................................................................................................9
Advantage and Disadvantage of Economic System..................................................................10
Impact of Macroeconomic Objective........................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is basically a zone for different businesses or companies where
they conduct their all business operations and activities to gain decided profit. Currently top-
level management within most businesses tries to make their business environment more
effective and more productive, because if any business has an effective business environment,
then it will be able to gain positive results in its respective market segments. There are lots of
factors also always existing in any company’s business environment, in which these factors can
affect that company in both ways positively and negatively. According to many business exerts,
each business should properly follow legal and ethical considerations in its business
environment, because this is the only way to maintain happy and healthy environment within
business. This report discusses business environment of the Sainsburys. It is one of the leading
retail companies within the United Kingdom. Some major aspects also have been discussed in
this report which has involved in business environment of Sainsburys.
MAIN BODY
Company Background
Sainsbury is one the major retail companies within the UK, headquartered in London, United
Kingdom. Currently this company has the second largest supermarket in its home country. John
James Sainsbury is the founder of Sainsburys, he established this retail company in 1869. From
establishment to date, company has highly succeeded in gaining large customer base in the
United Kingdom. Currently it has 1415 authorised stores and supermarkets across United
Kingdom (Puspasari, Sukmawati and Sumertajaya, 2017). On the other side, nowadays
Sainsburys has workforce of 116,100 employees who day completely loyal with company. Most
employees really like to work in company’s different stores and supermarkets, because top-level
management always consider employment law within Sainsburys business environment. The
company has generated £29.007 billion revenue in its last financial year. Recently top-level
management of company has decided to expand its business operation in the new international
market segments. According to management, business expansion is not a small task to for any
business, so before entering the new market segment, Sainsbury will be prepared a product

action place. Currently main mission of the company is to gain the largest market share within
the UK’s retail industry.
Factors of External Environment
Currently Sainsburys runs its business operations only in the United Kingdom. Of course,
existing management of company has decided to enter the new international market segment, but
currently it serves only in its home country the United Kingdom. Currently there are lots of
factors existing Sainsburys business environment which can affect it in both ways positively and
negatively. There is PESTEL analytical tool has used below for analysing impact of major
external factors.
PESTLE Analysis
PESTLE analysis is the most useful tool for various businesses or companies for
analysing national and international environment (Lu, Wang and Xu, 2019). Basically, PESTLE
term refers six major factors of existing market called; political, economic, social, technological,
legal and environmental. These all factors of Sainsburys’ business environment has been
discussed below;
Political factors: Top-level management of Sainsburys has highly required to fulfil those all
formaalitie4s which has imposed by the government of the United Kingdom on different
businesses which comes under its authorisation zone. For example; currently company always
need to fulfil taxation formalities to smoothly run its business operation in its home country UK.
On the other side, local government made favourable policies for all existing businesses or
companies, in which political factors are positively affecting Sainsburys.
Economic factors: Economic factors of the United Kingdom are also positively affecting this
retail company. Reason is, the UK is one of the richest countries in the world. In this situation,
there are most local people has high living standard, in which these people can easily afford
products and services which has offered by Sainsburys. Of course, currently existing economy of
this country is facing little bit slowdown due to corona virus epidemic, but this economic factor
is not much affecting Sainsburys. Reason is, this company mostly sells those products which are
too essential for local people. On the other side, company’s retail products mainly fulfil prime
needs of customers.

Social factors: Social factors of this market place are too favourable to Sainsburys. Currently
most people in the UK are completely literate, in which they always believe in buying quality
products and services (Evans and et.al., 2017). In this situation, top-level management of
company has great opportunity to earn huge profit by proving quality products to different
customers. On the other side, most people of this country like to buy retail products and services
only from those companies which always fulfils corporate social responsibility (CSR) on time.
That’s why Sainsburys also has required to fulfils its CSR on time.
Technological factors: Currently this retail company has great opportunity to take huge
advantage from the UK’s technological factors. Nowadays those all modern technological
gadgets, machineries, tools are available this country’s market which can contribute in any
company’s all over growth. In this situation, Sainsburys also should implement UK’s modern
technology within its daily operations for improving exiting performance.
Legal factors: The management of company is highly responsible to adhere and follow those all
laws, standards and acts which has passed by parliament of the United Kingdom for all
businesses or companies. There is employment law is also a major part of legal factors which
successfully employed by company in its workplace.
Environmental factors: Environmental factors also highly affects Sainsburys, because existing
management of company has highly required to avoid conducting such activities in its business
environment which can negatively impact natural environment (Kolk, 2016). On the other side,
company always need to adhere all rules and regulations which has passed by different natural
environment protection organisations.
Competitive Structure of the Market
In this dynamic and modern world, Sainsburys is facing huge competition within the
UK’s retail industry. There is porter five forces model has used below for analysing competitive
forces of existing retail company.
Porter’s Five Forces
Porter’s five forces is one of the finest models for all businesses and companies for
analysing five major competitive forces of any industry or sector. Top-level management of

Sainsburys has highly required to consider these five forces in its daily operations to gain huge
competitive advantage in the UK’s retail industry (Akhter, 2017). These Porter’s five forces has
been discussed below;
Bargaining power of suppliers: Currently bargaining power of supplier is not much higher for
the Sainsbury. Reason is, there are numbers of suppliers are something lower than number of
retail companies in the UK’s retail industry. Currently there are lots of suppliers existing in the
UK’s retail industry which are ready to provide raw-material and other good to Sainsburys on the
base of company’s terms and condition. Due to large number of suppliers this retail company is
able to purchase raw material from that supplier who provides that raw-material on the
favourable and cheapest price.
Bargaining power of customers: Bargaining power of customers is very high in the retail
industry of the United Kingdom. Currently a customer has large number of retail companies, in
which it can buy retail products from any company. In this situation, top-level management of
Sainsburys always need to run different marketing campaigns for attracting lots of customers
towards own brand. This step is very necessary for this retail company, because if company not
take this step, then exiting customers can choose other retail company for buying products and
services. On the other side, competitors of Sainsburys also has taken different innovative steps
towards attracts many customers towards their brand (Holmqvist and Ruiz, 2017). That’s why
Sainsburys should always maintain an effective relationship with different people or customers
in the market.
Competition in the industry: Currently there are huge competition in the retail industry of the
United Kingdom. There are Tesco, Sainsburys, Marks and Spencer, Iceland, Morrisons, and
Walmart’s subsidiary ASDA mainly leading the existing retail industry. I mean, these are some
major competitors for the Sainsburys. Currently Tesco has largest supermarket chain in the UK,
so it has the large number of customers as well. After Tesco, there are Sainsburys has the second
largest supermarket chain across the United Kingdom. These major companies are putting their
huge efforts for gaining large market share in existing retail company. In this situation,
Sainsburys has highly required to develop some productive business strategies for achieving
huge competitive advantage in the existing retail industry.

Threat of new entrants: Market competition within the UK’s retail industry is increasing day by
day, because there are lots of new retail companies coming in this industry per year. But before
entering this industry, a company owner always need to analyse exiting market competition. On
other side, if any new company enter in this industry, then existing major retail companies will
give tough competition to that new entrants. Any new entrant can gain high profit in this industry
only in one condition that, new entrant should provide some different or exclusive range of
products and services (Rittenburg and et.al., 2016). Otherwise any new entrant can’t survive in
the UK’s existing retail industry. Top-level management of Sainsburys need to prepare a pre-
plan for dealing different new entrants, because many times new entrants also can gain huge
market share in their initial stage.
Threat of substitute products: Currently Sainsburys has threat of substitute products as well,
because customers always able to choose different products and services in the market according
to their comfortability. For example; a customer come in a Sainsburys’ store for buying a hair
shampoo, but finally it has rejected that shampoo due to high rate, and goes to another brand’s
store for buying bathing soap in replacement of hair shampoo. This type of situations is not
favourable to the Sainsburys, so top-level management should offer favourable and customer
friendly prices to customers for always staying connected them with own products and services.
Stakeholder Analysis
The company always need to conduct stakeholder analysis tool for knowing power and
interest of its main stakeholders. There is stakeholder analysis tool is helpful in indetifying major
stakeholders of the company in, in which Sainsburys also need to use this stakeholder analysis
tool for knowing its major or main stakeholders (Berman and Dalzell-Payne, 2018). Basically,
there are mainly three steps in included in this tool which company should follow to analyse
actual power and interest of its stakeholders. On the other side, by taking these steps, company
will be able to resolve different conflicts also which mainly raises between stakeholders and
company. These three steps of stakeholder analysis tool have been mentioned below;
Step 1: Determination of stakeholders
This is the first step within the stakeholder analysis tool where top-level management of
Sainsburys should prepare a list of its major stakeholders. For example; currently customers,

employees, government, shareholders and suppliers etc. are some major stakeholders of
Sainsburys. In this situation, existing management should mention these all stakeholders in its
stakeholder list. This is very simple step for the management, because each company or business
always knows its main stakeholders. The company is always responsible to maintain an effective
relationship with it’s all stakeholders (Jeong, 2017). Reason is, without support of these
stakeholders, Sainsburys can’t achieve its decided objectives in decided time period.
Step 2: Prioritize stakeholders
This is the second step within the stakeholder analysis tool after determination of
stakeholders. The management of company should prioritize its stakeholders on the basis of
power and interest. In this step, company mainly need to conduct power/interest grid which will
give opportunity to Sainsbury for knowing actual power and interest of its various stakeholders.
Basically, power/interest grid helps in dividing all stakeholders into four categories, in which
these four categories of stakeholders has been discussed below;
 High power and high interest: There are shareholders always has high power and high
interest in company, because they always provide specific fund to company buy buying
its shares. In this situation, they have right to sometimes run company’s operations on
self-choices. On the other side, they always take too much interest in company for
gaining excellent results.
 High power and low interest: In Sainsburys’ main stakeholders, there customers of
company come under this category, because a customer always has very high power on
any company or business. According to many business experts, a customer is the king of
market. That’s why it has very high power. Sainsburys can’t run its business operations in
the market without customers’ support. On the other side, they have various other retail
companies also for fulfilling their needs of retail products. That’s why they have law
interest in Sainsburys. There is government has high power and low interest in company,
because Sainsburys always need to follow all rules and regulations of government.
 Low power and high interest: Employees always has low power in the company, because
they always need to work on the basis of their upper management’s instructions.
Employees has no right take major decision within company. On the other side, they have

high interest in company, because they have fully depended on Sainsburys for fulfilling
their earning needs.
 Low power and low interest: Mainly suppliers come under this category, because they
have no power to take some specific decisions within company (Sales and Beschorner,
2017). Provide raw-material and other necessary goods to Sainsburys on management’s
order, this is the only role of suppliers within this retail company. On the other side, they
have low interest as well, because they have some other companies also for supplying
their goods or items.
Step 3: Communicate with stakeholders
This is the final step in the stakeholder analytical tool, where top-level management of
company should take some decisions for properly communicating with it’s all stakeholders. The
aim behind this step is to build an extra-ordinary relationship with stakeholders. Existing
management need to use its effective communication skills for effectively communicating with
its various stakeholders. The Sainsbury will be able to maintain an effective relationship its’s all
stakeholder by taking this step.
National Economic System
Economic system of the United Kingdom is very favourable to Sainsburys, because
currently this retail company has great opportunity to grow its business operations in this
economic system. The UK is one of richest countries in the world, because its export ratio is
higher than import ratio. Currently many MNCs (Multi-National Companies) also taking huge
advantages from UK’s healthy economic system. Currently lots of existing businesses have
provided great employment opportunities to local people (Neneh, 2016). The government of the
United Kingdom mainly focuses on export maximum products and services outside of the
country, because government believes in gaining huge fund in the form of foreign exchange.
On the other side, government charges high taxation amount from suppliers who supplies
products and services in the United Kingdom from other country. These various steps
government high contributes in growing economic conditions of the United Kingdom. This
country has some exclusive natural resources also which its provides in international market on
vey higher prices. Currently local government runs different campaigns for encouraging its youth

for opening new start-ups, because if number of businesses increase in this country, then these
businesses will generate great employment opportunity (Ren and et.al., 2017). Of course, due to
corona virus epidemic, economy of UK is suffering from little bit slowdown, but it has huge fund
in the form of foreign exchange, so this country will easily overcome from existing economic
conditions. Existing fiscal and monetary policies of the United Kingdom are completely in the
favour of Sainsburys. In this situation, top-level management of company should make a
productive action plan for highly growing its business operation in the UK’s economic system.
Advantage and Disadvantage of Economic System
Advantages
Sainsburys has great opportunities in the economic system of the UK, because local
government has succeeded in maintain a healthy business environment in this country, so any
business or company can easily gain huge profit in exiting economic system by implementing
some effective business tactics (Daniluk, 2017). On the other side, recently government has
decreased some taxation rate on national companies or businesses, in which this factors can
affect positively to the Sainsburys. Most people of the United Kingdom have high living
standard, in which they can easily afford products and services of Sainsburys. In this situation,
management should run some effective marketing campaigns for attracting lots of new customers
towards own brand.
Disadvantages
Currently economic system of this country is suffering from slowdown due to corona
virus epidemic, so this factor has decreased sales ratio of Sainsburys. On the other side,
currently many new retail companies entering in the market day by day, because these
companies also want to take economic conditions of this country. In this situation, this factor of
UK’s economic system is increasing market competition in existing retail industry
Impact of Macroeconomic Objective
Government of the United Kingdom always invites big MNCs for producing their
products and services in its authorisation area. The main objective of government behind this
step is to generate huge employment opportunities in the country (Zhao, Pan and Chen, 2018). In
this situation, many international retail companies entering in the UK’s retail industry. For

example; currently German retail company ALDI has succeeded in gaining large market share
within UK’s retail industry, so this objective of government is not much favourable to the
Sainsbury
CONCLUSION
It can be concluded that currently there are various existing in the Sainsburys internal and
external business environment which can affect it in both ways positively and negatively.
According to the PESTLE analysis, there are mots external factors favourable to this retail
company. Top-level management of company should take some specific decisions for
systematically dealing these all factors. Currently Sainsburys faces huge competition within the
UK’s retail industry. There are Tesco, ASDA, ALDI, Marks and Spencer retail companies are
giving huge competition to Sainsbury in the United Kingdom. On the other side, there are
customers, employees, government, suppliers, shareholders and suppliers some major
stakeholders of this retail company. Existing economic system of the UK sis very favourable toe
Sainsburys. Currently existing management of company is able to take huge advantages for
existing economic system. The management of company should make their marketing functions
more effective. Reason is, with the support to effective marketing, Sainsburys can easily gain
huge competitive advantage in the UK’s retail industry.

REFERENCES
Books & Journals
Akhter, F., 2017. Unlocking digital entrepreneurship through technical business process.
Berman, S. and Dalzell-Payne, P., 2018. The interaction of strategy and technology in an era of
business re-invention. Strategy & Leadership.
Daniluk, A., 2017. Cooperation between business companies and the institutions in the context
of innovations implementation. Procedia Engineering. 182. pp.127-134.
Evans, S., and et.al., 2017. Business model innovation for sustainability: Towards a unified
perspective for creation of sustainable business models. Business Strategy and the
Environment. 26(5). pp.597-608.
Holmqvist, J. and Ruiz, C. D., 2017. Service ecosystems, markets and business networks. The
TQM Journal.
Jeong, Y. S., 2017. A Study on improving manufacturing environment using IoT technology in
small business environment. Journal of Convergence for Information Technology. 7(2).
pp.83-90.
Kolk, A., 2016. The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business. 51(1).
pp.23-34.
Lu, Y., Wang, H. and Xu, X., 2019. ManuService ontology: A product data model for service-
oriented business interactions in a cloud manufacturing environment. Journal of
Intelligent Manufacturing. 30(1). pp.317-334.
Neneh, B. N., 2016. Market orientation and performance: the contingency role of external
environment. Environmental economics. 7(2). pp.1-14.
Puspasari, N., Sukmawati, A. and Sumertajaya, I. M., 2017. Leadership style, organizational
communication, and employee participation to increase employee readiness in facing
changes in business environment. Jurnal Aplikasi Manajemen. 15(4). pp.651-658.
Ren, J. F., and et.al., 2017. Modelling quality dynamics on business value and firm performance
in big data analytics environment.
Rittenburg, and et.al., 2016. The effects of euphemism usage in business contexts. Journal of
Business Ethics. 137(2). pp.315-320.
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.

Zhao, X., Pan, W. and Chen, L., 2018. Disentangling the relationships between business model
innovation for low or zero carbon buildings and its influencing factors using structural
equation modelling. Journal of Cleaner Production. 178. pp.154-165.