Global Business Report: Contemporary Issues in Retail Sector Analysis

This industry report analyzes the impact of contemporary global business issues on organizational policies and operations, using Tesco and Sainsbury's as case studies within the UK retail sector. The report begins with an introduction to globalization and its influence on business expansion, followed by an overview of the UK retail industry, including its challenges and opportunities. A PESTEL analysis is employed to evaluate the political, economic, social, technological, environmental, and legal factors affecting the retail sector. The report further examines how Tesco and Sainsbury's enhance their leadership qualities and competencies in response to these global challenges. The analysis includes discussions on government policies, economic fluctuations, consumer behavior, and technological advancements, all of which influence the companies' strategies and operations. The report concludes by summarizing the key findings and implications for the future of these companies and the retail sector as a whole. The report uses the Harvard referencing style.

Global Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
1. Evaluate that how contemporary global business issues impact the organizational policies
and operations..............................................................................................................................2
2. Analyse that how two companies enhance their leadership quality and competencies...........7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Globalization is the interconnectedness of people and organizations across the world
where they share global values, cultures, political or economic integration. With the help of it,
business man able to expand their business internationally and expand their reach which provide
them more profitability (Amankwah-Amoah, 2016). In the late 1970, air plane, telephone and
internet are just three inventions but as per the current industry demand in technology will help
the business to promote their product in the global market. There are various global challenges
which organizations have to face. So businesses have to make strategies and adopt suitable
theory which provide suitable solutions for the global challenges. For the better understanding of
this concept, this report select the retail sector organizations such as Tesco and Sainsbury's. Both
companies are from same sector and the competitors of each others. They almost face the similar
issues but what strategy they select to resolve it.
Retail industry of UK involved the 4.3 million employees and produce trillions of dollars
revenue every year. It is different from another industries because here they do not manufacture
goods they just purchase from suppliers in bulk and placed in the stores. In 2017, retail sector
economic output was £ 92.8 billion, employment was £ 2.8 million and 319000 retail businesses
in 2018 (Retail Sector in the UK, 2018). Total sale of UK in 2017 worth £ 395 billion and for
every pound they spend 39% in food stores, 12% in clothing shops, 9% in automotive fuel, 8% in
household goods etc. In 2018, around 28 retail companies closed because it ceased which affect
the 2085 stores and 39000 jobs according to the “ Centre for Retail Research”.
Britain's retail landscape is dominated by the large supermarkets such as Tesco, Asda,
Morrisons and Sainsbury's. There are various challenges faced by the UK's retail sector such as
increase the wages rates at least 7.83 for those who are 25 plus. Brexit also one of the major
issues which make an retailers under pressure where weak pound affect the import costs (Issues
in Retail Sector, 2018). No deal “Hard Brexit” could cost the UK retail industry up to £ 7.8
billion in tariffs as per the analyst of retail economics. There are some opportunities for retail
sector of UK where they have to more focus on sharing e- branding, high street investment, data
handing, seamless service etc.
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MAIN BODY
1. Evaluate that how contemporary global business issues impact the organizational policies and
operations
According to Pantano, Priporas, Sorace and Iazzolino, 2017, Retail industry is one the
growing sector which generate maximum revenue for the country. Competitiveness and
complexity in the retail sector increasing because of rapid change in the technology and
diffusion. Due to use of high or latest technology innovation, organization adopt the patent
analysis which is more in trend. There are total 319,125 retail business in the UK in 2018 and
most of the sectors in economy made up 99% of retail business which include the small and
medium size enterprises. In the economy there are various ups and falls UK face in the retail
business and it will happen due to globalization of the industries. Retail sector also have pressure
which drive the change such as shop closure and it will happen due to operational failure.
Internet retailing is one of the issue for street stores. Shop online is the latest trend of economy
which affect the tradition way of doing business.
PESTEL Analysis: It is the tool which help the organization to identify those factors
which affect the whole business as well as industry. It include the external factors which impact
the production as well as profitability. With the help of PESTEL analysis, organizations able to
formulate their strategies and further it is beneficial in the decision making process (PESTEL
Analysis of Retail Industry, 2019). Retail sector analysis will include the issues regarding
political, economic, social, technological, environmental and legal. With the help of these issues,
managers able to formulate business strategies accordingly.
Political Factors: Revenue of the retail sector companies totally affected by the
government policies. Rules and regulations impact the economy as well as performance of
business. Due to change in the government policies, it will directly affect the buying behaviour
of consumers, international trade laws, tariff, trade control laws, corruption, employment, tax
related policy etc. For example: Import duty on goods can affect the Tesco operations because
some raw material company import from another country such as China and East Asia. So
increase in import duty will increase the cost of products which impact on Tesco's revenue for
the period. Increase in tax rates on supermarket also one of the issue which retail organizations
face such as Tesco & Sainsbury's (Kasemsap, 2016). It will impact the business operations where
they have to bear high cost of goods and in result it can reduce the demand as well as profit
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margin of the company. There are other factors also available which impact the sales of
Sainsbury's as well as Tesco due to change in the government policy. It can negatively impact
the demand as well as profitability. These political issues will impact the retail industry which
reduce their profit margin as well as growth in the country. Both organization have to follow the
health standards which proposed by the government of UK.
Government policy not only affect the physical stores but also influence those
organization which operate their business with the help of E-commerce. Online business became
more popular but it also include some issues which organizations have to face. Such as antitrust
issues, breach data which cause the government that how to store information in well manner. It
will also impact the retail industry such as Wal-Mart, Amazon etc. These are those companies
which provide online products across the country. They have to secure data in well manner
which is an bid issues that retail industry face. These political issues influence the business
policies and impact the operations (Boshyk ed., 2016). In order to minimise the imp0act they
have to be aware about every change in the government policy and make sure to modify
accordingly.
Economic Factors: In the economy, customer allows to buy goods as per their wants
rather than what they need. If economy is in growing stage then it will attract more inventors to
show their interest in the profitability which offered by the retail stores. In case of decline
situation in the economy, consumers only spend on those item which is necessity for them and
save their money for the future. In this situation, unemployment rates goes up and some specific
industry affect the most. In case of retail industry, they able to hold their productivity as well as
profitability in the recession period. By 2020, retail industry sales will going to near by $ 30
trillion. Currently consumers have disposable income to spend on their favourable items.
Recession is the major issues which affect the each industry and it does not matter that how
attractive products company offer. In order to survive in the market retail companies have to cut
their products price where they have to suffer loss. Tesco is one of the biggest supermarket retail
sector store which dominate the market. In order to maintain their profitability, company have to
aware about the change in the policy such as taxation and other policies (Kasemsap, 2018).
Tesco depend upon the UK market where company have around 30% market share. At the time
of recession in the UK, Tesco affect the most because it is largely depend upon the UK market
where they have to suffer loss. Sainsbury's company also face various issues due to stability of
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host country and exchange rate. Company sell their product across the country so interest rate,
exchange rate, currency rate impact the overall revenue of the business. At the time of export or
import of goods will affect the profitability because change in the currency rates will affect the
cost of products which reduce the profit margin. Competition in the market also one of the issues
which Saunsbury's face and it will influence the sales as well as revenue of the company.
Due to poor condition of economy, every organization of retail sector get affected or in
order to minimise these impacts they have to formulate strategies through analysing all the issues
from the base. Retail sector companies have to react accordingly through cutting price of
products in the recession period. Tesco and Saisbury's both are retail sector organization which
almost face the same issues because they deal in the same industry (Khadartseva and Agnaeva,
2014). So they have to adopt necessary actions which help them to survive in the market and
able to recover as fast they can. Economic issue affect the organization policies and operations
where demand of products reduces so company have to change their policies such as reducing
product cost which can helps in maintaining demand of goods.
Social Factors: In the business environment, consumer preferences are the major factor
which affect the retail industry. Because if consumers like the products so they purchase in bulk
quantity which is beneficial for the business and it further helps in maximising productivity as
well as profitability. Mostly food products demanded in large quantity and cloths, electronics etc.
In order to satisfy or meet with consumer's expectation business have to analyse the social
factors which affect the retail industry. General issue is that workforce which required to handle
large number of consumers at the same time. With the help of market research, organization able
to analyse the market trends which impact the business operations (Motohashi, 2015). When
retail company know that which product is more in demand then it will helps in producing
products as per the market demand.
According to one research, trends indicate that UK's customers move towards bulk
shopping. Because of this reason, Tesco increase the non food items and it will be offered for
sale. Mostly demanded products are based on consumer's beliefs and attitude. Change in the
population also change the taste, preference or demand of product which become issues for the
organizations. Both organizations are from retail sector so they get affected for the same issues.
So due to change in consumer's behaviour and attitude regarding products. Due to increase
awareness regarding health, customer check all the details and make sure that it fulfilling the
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standard of products which make ensure its quality. Health issues become major social factor for
both organizations such as Tesco or Sainsbury's. Both business have to change their operations
according to the market demand where they use organic products which occur the high cost. In
the competitive environment, if business sell their products on high cost in comparison to their
competitors then it will affect the demand of goods as well as profitability (Peng, 2016). Because
of this social issue, company have to select cost effective strategy where they try to minimise
their product cost which increase demand as well as profit margin. This issue affect the
organizational policies and operations. Tesco and Sainsbury's both are offer online products and
it is beneficial for them to collect customer information which further beneficial in strategic
decisions in respect of increasing sales.
Technological Factors: Retail stores use the variety of technology which helps in
increasing daily basis sales. Before introducing latest technology, business use the cash register
to manage money after every sales (Ratten, Dana and Ramadani, 2017). After the introduction of
technology which helps in managing all the transactions with the help of software, system,
hardware etc. It is more profitable for large size organizations because they done huge money
related transactions in single day. It required one time investment to place this software or
system and required some instructions regarding its use. Technology also change after some time
and it order to maintain their productivity they have to adopt these changes according to time.
Sainsbury's company recently adopt latest technology in order to provide tough competition to
their rival firm. But with in a year, technology also changed which is important to adopt
otherwise it affect the business operations. Regular change in the technology become big issue
for the Sainsbury's company. Because it required huge investment as well as change the whole
set up of processing. It become very complex for the business to change their existing technology
and adopt the latest one. In order to manage it, in effective way they have to provide relevant
skills to their staff members. Change in technology also affect the cost structure of the company,
so this issue affect the Sainsbury's business policy as well as operations. Advancement in
technology provide various opportunity for Tesco (Ruggie, 2014). Company invested huge
amount to place latest technology which affect the overall cost of goods. Regular modification in
technology required lot of time, human efforts, training as well as skilled employees. These
issues company have to face which further affect the business policies and operations.
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Sainsbury's and Tesco both are retail sector companies, so when technology provide the
various opportunity similarly they generate issues as well. In order to face these challenges they
have to build strategies accordingly. Most of the organizations shift towards digital platform
where they sell their products online (Salvatore, 2015). In order to make friendly with
digitalization they have to provide effecting training to their staff members regarding use of
technology and they make sure to higher skilled people who can handle it in effective manner.
Environmental Factors: In the retail industry, most of the shops offer food products
which is required to have good quality. So it is one of the major issues which organization have
to face because they need to meet the quality standards as per the law. For example: company
have to pay more tax if they selling “SODA” in their stores and it will be consider into SODA
tax. Along with this, if retail stores sell fatty foods then they have to pay more as per the
environmental law. It become costly for the business to pay extra tax because of some specific
product. This is an another issue which impact the production as well as profitability. There are
various environmental pressure on the organization which they have to face but for this
management have to build effective strategy, weather, climate change, recycling, wastage etc.
Tesco and Sainsbury's both are facing issues regarding wastage, so they have to adopt effective
supply chain strategy to minimise the waste at the time of transporting goods from warehouses to
stores (Scherer, Palazzo and Matten, 2014). Tesco reduce its carbon footprint by 50% by 2020
and minimise the waste through increasing social conscience in customers. This environmental
issue affect the organizational policies and operations. All the retail industries stores have to
meet the environmental requirements for consumers and employee safety. These regulations set
by the government which is not negotiable.
Legal Factor: Every organization and industry have to follow legal rules & legislation,
without this they are enable to run their business in the market. Most of the conditions or
legislation are same for the industry. It includes the tax rates, anti trust law, copyright, patents,
consumer protection law, employment, health & safety etc. These regulations are mandatory for
the business to follow it otherwise it affect the production, consumer base or profitability of
business. Avoidance of these regulations will cause the government interference which is not
beneficial for any organization. Business not only have to follow domestic rules, but they have to
follow the international laws as well if they offer their goods in the international market
(Shenkar, Luo and Chi, 2014). Sainsbury's company face the issue regarding employees wages
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because change in the wage will increase the product cost but they have to pay as per the
standards wage rate. They also have to make sure that they follow other legislation otherwise it
impact the production as well as profitability. On the other hand, Tesco have to follow Food
Retailing Commission (FRC) which suggest some practices such as change the product price,
include quality material which match the overall standards. They also make their promotional
strategy as as per the regulations which does not create any social issue. It is very important for
the organizations to understand the legal obligations otherwise it will create bankruptcy and
other issues. In order to prevent these issues they have to increase their understandings regarding
laws and reticulation.
Above mention factors generate the various issues for the retail industry which they have
to resolve otherwise it largely impact the production as well as profitability (Wang and et.al.,
2017). In order to enhance productivity as well as profitability of business operations they have
to formulate strategy and being aware about each and every change in the government & other
policies which is important ton know. Sainsbury's and Tesco face the various issues, so they have
to evaluate external factors before making any strategic decisions. Make sure to implement in
effective manner which provide them positive response and monitor the operations on regular
basis for the identification of any operational issues.
2. Analyse that how two companies enhance their leadership quality and competencies
In order to enhance the leadership quality or competencies, business have to follow
various theories and develop skills in the managers. Leadership is very important to any business
because it helps in motivating employees to perform as per the requirement and make sure to
achieving business goals & objectives. So both organizations such as Sainsbury's and Tesco have
to focus on improving individual productivity and it only possible when they have relevant skills
and competencies. There are various theories which followed by the both organizations in order
to improve leadership quality and competencies. Some of them discussed below:
Sustainability: In order to maintain the sustainability in the organization have to
perform various task which make business more competitive more resilient to shock. In order to
maintain sustainability, Tesco contribute in various ways through analysing that which
sustainable goals match with the organization and they are able to perform. Responsible
consumption and production is significantly for Tesco. It is one of the company which publish
the data regarding regarding food wastage in their operations and track the progress regularly. In
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the Sainsbury's company, they develop independent sustainability standards for sourcing raw
material (Willcocks, Lacity and Craig, 2017). Where they work with trusted partners who
provide them quality material which they used to sell customers in order to make sustainability.
with the help of these sustainable efforts, both companies able to enhance their leadership quality
or competencies.
Corporate Social Responsibility (CSR): It is the social contribution which helps the
organization to provide sustainability and get comparative advantage with the help of it.
Sainsbury's conduct a program regrading “Living healthier lives” here company offer nutritious
or healthy food to the customers and encourage them to live active lifestyle (Corporate Social
Responsibility of Sainsbury's, 2018). Sainsbury's taking 33,350 schools & clubs as a part of
active kids scheme in 2017-18. 91% stores take part in the charitable activity where they collect
£35 million for good cause. Tesco involved in Global Social Compliances Programme where
they focus on global issues and try to provide effective solutions to resolve it. Over 280000
employees activity support the Marie Curie Care Centre through giving 6.3 million pound for the
good cause. CSR activities help the both organizations to enhance their leadership quality as well
as competencies which helps in maximising productivity as well as profitability.
Competitive advantage: it help the organization to maximise their productivity as well
as profitability. Because of diversification in products, effective distribution system, focus on
digital programs which generate awarenesses among the customers will help the Tesco to get
competitive advantage. It will further increase the demand of products which automatically
increase the productivity as well as profit margin. Sainsbury's use the marketing mix approach to
get competitive advantage and here they majorly focus on developing new products but make
sure to maintain food quality which is healthier for customers. Sainsbury's focus on customer
value which provide them competitive advantage. These activities help both organizations to
enhance their leadership quality and competencies.
Participation in the business activity: In order to enhance the leadership quality and
competencies they they have to increase the employees participation in the decision making
process. Involvement of employees in the business activity will helps in generating new ideas
which turn into innovation (Wirtz, Tuzovic and Ehret, 2015). It also make effective relation
between workers and employers which is very important to have in order to perform well or
achieve organizational goals & objectives. Sainsbury's and Tesco both business required to
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encourage their staff members to take participation in the decision making process and suggest
some valuable ideas which can become future opportunity for the organizations.
Stakeholder relationship: It is one the important theory where organizations have to
maintain their relationship with their stakeholders. These people are very important such as
investors who invested money in the business for the purpose of profit share. Suppliers who
have to supply material on time with quality which can meet the standards. There are other
stakeholders also available such as owner, shareholders, customers, employees etc. Both
organization such as Sainsbury's or Tesco have to maintain effective relation which increase the
leadership quality as well as competencies.
Above mention theories help the Sainsbury's as well as Tesco to improve their leadership
quality which is very beneficial for the organization. It further increase the employees
productivity as well as profitability which required to meet the business goals & objectives.
CONCLUSION
From the above discussion it has been concluded that globalization is one the major
factor which affect the business operations through expanding into another countries. It will
reduce the dependency of home country and increase customer base, market share, revenue etc.
Globalization is a kind of opportunity for those business which wanted to maximise production
as well as profit margin of their operations. Before thinking any expansion they have to evaluate
the external factors which provide them various opportunity. Along with this, external analysis
also beneficial to identify the negative impact that business have to bear if they enter in the
global market. This external analysis will be done with the help of PESTEL analysis which help
the organization to identify the issues which can affect the business and reduce the productivity
as well as profitability of business operations. With the help of various theories organization able
to enhance their leadership quality as well as competencies.
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