Business Environment Report

This report examines the business environment of Sainsbury's, a major UK supermarket chain. It begins by defining different organizational types (public, private, non-profit) and outlining the objectives of various stakeholders (employees, managers, customers, suppliers). The report then details the responsibilities of Sainsbury's towards these stakeholders and the measures taken to fulfill them. A key section analyzes the impact of fiscal and monetary policies, as well as competition policies and regulatory mechanisms, on Sainsbury's operations. Different market structures (perfect competition, monopoly, oligopoly, monopolistic competition) are discussed in relation to Sainsbury's pricing and output decisions. The influence of market forces (demand and supply, mergers and acquisitions, customer perception) on organizational responses is explored. Finally, a PESTLE analysis assesses the impact of the business and cultural environments on Sainsbury's behavior. The report concludes by summarizing the various internal and external factors affecting Sainsbury's performance and profitability.

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purpose of different type of organization..............................................................................1
1.2 Objectives of different stakeholders......................................................................................2
1.3 Responsibilities of the organization and necessary measures to meet them.........................2
2.1 Economic systems attempt to allocate resources effectively.................................................3
2.2 Impact of fiscal and monetary policy on Sainsbury..............................................................4
2.3 Impact of competition policy and other regulatory mechanisms on the activities of
Sainsbury.....................................................................................................................................4
3.1 Market structure affecting the pricing and output decision of the Sainsbury........................5
3.2 The way in which market forces shape organizational responses.........................................5
3.3 How the business and cultural environments shape the behavior of a selected organization6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business environment consists of all internal and external factors that affect the working of
the organization from within and outside the organization. Sainsbury is the retail firm
headquartered in Holborn, London. It is the second largest chain of supermarket in the United
Kingdom. In year 1995, Tesco took over the Sainsbury to become one of the market leaders. The
following report depicts about the purpose of various type of organization. In this report
requirement of the stakeholders are discussed and at the same time what necessary measures are
taken up by the company are discussed. In this report impact of fiscal, monetary and competition
policy on the organization are examined. In this report an attempt is made to understand the
behavior of organization in the available market environment.
TASK 1
1.1 Purpose of different type of organization.
 Public organization: - Public organization is the organization which is owned by the
government and all its operations are also controlled by the government (Björklund,
2011). The main purpose of this organization is to work for the betterment and welfare of
the society. These organizations make an attempt to generate more and more profit but
keeping in mind the welfare of the society members.
 Private organization: - Private organizations are owned by the private individual. It’s all
the operations are also controlled and managed by the individual person only. These
types of organization can be partnership firm, sole traders or company. The main purpose
of theses organization is to simply generate large amount of profit. In this type of
organization interference of government is nil or very less.
 Non-profit organization: - Non-profit organization is the organization that only works
for the betterment of the society. There main purpose is avail charitable service to the
every individual free of cost. Profit maximization does not affect them more (Chi, Kilduff
and Gargeya, 2009). These types of organization are owned and managed by the single
individual.
Therefore, Sainsbury is the private organization and its main purpose is to generate more
and more profit by offering variety of products and services to the customers.
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1.2 Objectives of different stakeholders.
There are different types of stakeholders that affect the working of the organization. Some
of them are present in the internal environment and some of them in the external environment.
Internal stakeholders
 Employees: - Employees are the value assets for the company. They work for the
betterment of the company. They simply want their job security, bonus, incentives,
respect and a healthy working environment (Craig and Campbell, 2012). Therefore, in
order to motive and keep them satisfied Sainsbury is taking all necessary measure into
consideration. It is organizing various training sections to motivate the employees in
order to create a healthy work environment.
 Manager: - Manager is the person who control and manage all the activities that are
taking place in the organization. They prepare various strategies in order to overcome
various faced by the company. These stakeholders want that company should generate
more and more profit and according to the set standards. Thus, in order to keep satisfied
the manager company is taking all necessary measures into consideration. They are trying
to use various techniques and methods in order to increase its profitability.
External stakeholders
 Customers: - Customers are one of the valuable stakeholders of the company. They want
value for the money invested. They want that company should provide them high quality
products at low cost. Therefore, in order to satisfy the customers Sainsbury is taking all
necessary steps into consideration. They are trying to use various technologies in order to
provide customers high quality products at low cost.
 Supplier: - Supplier is the distributor to the company. They supply raw material to the
company in order to produce finished goods. These stakeholders wants that company
should frequently place the order for the raw material and should make payment on time.
Therefore, Sainsbury tries to normally purchase the raw material by making advance
payment only.
1.3 Responsibilities of the organization and necessary measures to meet them.
 Employees: - Responsibilities of the organization towards its employees is that they
should see that no illegal practices are taking place in the organization like malpractice
and discrimination on the bases of caste, creed and gender. Therefore, in order to remove
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these types of practice an organization should conduct various training section and should
implement various strict rules and norms against the faulty person.
 Shareholders: - It is the responsibilities of the organization to satisfy the shareholders by
providing them high return on investment made by them on regular bases. Therefore, it is
possible only by increasing its profitability (Czinkota and et.al, 2009). Thus, in lieu of
which company should various methods and strategies. They should either follow the
cost control techniques or should follow the concept of downsizing.
 Customer: - It is the responsibilities of the organization to see customers are highly
satisfied with the products and services provide to them. And at the same time company
is also able to provide them high quality products at low cost. Therefore, in order to
reduce the cost of the product company should use latest technologies and techniques.
 Supplier: - Responsibilities of the organization towards its suppliers is that company
should place a continuous order of raw material on time and at the same time make
payment to the suppliers on the regular basis. Thus, in order to satisfy the suppliers
Sainsbury purchases the goods on cash payment only and if credit purchase is made then
timely payment is made up.
2.1 Economic systems attempt to allocate resources effectively.
 Market economy: - In this type of economy all the operations and working of the
organization all controlled and managed by the members working in the organization. In
this type of economy there is no interference of the government (Hill, 2008). In this
economy demand and supply of the goods and services depends upon the company and
the customer. Therefore, in simple words it could be said that allocation of resources
completely depends on the decision of the company.
 Command economy: - In this type of economy all the operations and functions of the
organization all controlled and manage by the government only. Decision regarding
supply of goods and services depends upon the government. Therefore, allocation of all
the resources like labor, capital and material depends upon the government decision only.
 Mixed economy: - It is the economy in which all the operations and functions are
controlled and managed by both the government and the individual. In this type of
economy internal affairs are controlled by the individuals present in the organization and
external affairs are controlled by the government (Johnson, Lenartowicz and Apud,
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2006). In this type of economy allocation of resources is decided by both the government
and the company. Therefore, the organization working under this type of economy aims
at maximizing its profit considering the welfare of the society.
Thus, Sainsbury is the organization which falls under the mixed economy, where all the
operations are controlled by the company and the government.
2.2 Impact of fiscal and monetary policy on Sainsbury.
Fiscal policy: - It is the policy introduced by the government in order to control and
manage the inflow of outflow of the cash with the country. This policy was mainly introduced in
order to stop the condition of inflation and deflation.
Impact of the policy
Introduction of this policy affects the profit margin of the company. Imposition of high
rate of taxes forces the company to increase the price of the product or to reduce the quantity.
This in turn reduces the demand and supply of goods and services provided by the company
because of the availability of large number of similar products. Switching over to another
product reduces the profitability level of the company.
Monetary policy: - This policy was introduced by the Federal Reserve board in order to
encounter the monetary disequilibrium in the economy. Introduction of this policy has affected
the financial and decisions of both the company and the customers (Klapper and Love, 2010).
The main aim of introduction of this policy is to increase the cost of the currency and create
stability in the economy.
Impact of the policy
Introduction of this policy has affected the research and development strategies of the
company. Introduction of this policy has reduces the interest rate of the banks. This in turn aids
the company to easily avail the bank loan in order to meet its requirement.
2.3 Impact of competition policy and other regulatory mechanisms on the activities of Sainsbury.
Introduction of Competition policy and other regulatory mechanisms has affected the
working of the Sainsbury. This policy was introduced by the government in 1988 to stop the
monopoly that is taking place in the market (Morrison, 2006). This policy was introduced in
order to protect the customers from illegal practices followed by the companies. This in turn
affects the various strategies formation of the company. Introduction of this policy has also
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affected the profitability level of the Sainsbury. The reason behind this is that now company
needs to sell high quality products to the customer at low cost.
3.1 Market structure affecting the pricing and output decision of the Sainsbury.
There are four types of market structures that can affect the working of the pricing and
output decision of the Sainsbury. Types of market structure are:-
 Perfect competition: - In case of perfect competition large number of sellers is present in
the market producing the same type of products. There is no barrier on the entry of new
firm. Elasticity of demand is perfectly elastic (Sen, 2011). Those firms who enter into this
type of market structure have the complete knowledge about the market condition
because in this case level of competition is very high. Railway industry works under this
type of market. Therefore, Sainsbury does not work under this type of economy.
 Monopoly market: - In this type market structure only single seller is present with no
close substitute. In this case entry of new firm is very difficult. Elasticity of demand is
zero. Companies working under this type of market structure only aim at profit
maximization because of non availability of the competitors. Retail and airlines industry
fall under this category. Thus, it can be said that Sainsbury works under this type of
market structure.
 Oligopoly market: - In this type of market structure few sellers are available with close
substitute products. Price of the products is decided by the company keeping in mind its
competitors product price. In this type of market entry of new firm is very easily. Due to
which level of competition is very high.
 Monopolistic market:-In this type of market there is large number of firms present with
large amount of substitute product (Palmer and Hartley, 2008). Due to which level of
competition has also increased. There is no barrier on the entry of new firm. Elasticity of
demand is less.
3.2 The way in which market forces shape organizational responses
 Demand and supply: - Demand and supply curve aid the organization to set the prices of
the products. If demand increases than price of the product reduce alternatively if price
increases than demand of the product decreases (Solomon and et.al, 2014). Therefore, it
can be said that price and demand both have inverse relationship. Therefore, if demand
increases than it will prove beneficial for the company. Company will be able to generate
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more profit. Similarly if demand decreases than profitability level of the company will
also decrease.
 Mergers and acquisition:-Merger and acquisition is the process in which one company
overtake the another company in order to expand its business operation. Normally merger
and acquisition is take place between healthy and the sick organization. Therefore,
merger and acquisition proves beneficial for the company in order to increase its
profitability level. Thus, in order to expand its business and increase profitability Tesco
has takeover the Sainsbury and has became one of the largest retail firm.
 Customer's perception: - Customer's perception can be defined as the awareness of the
customer about the product and services offered by the company (Teece, 2010).
Customer's can be aware about the products through advertisement and social media.
Customer perception can affect the demand and supply of the products. Because in
market large variety of products are available which can attract the customers more due
to availability of high quality products at low price.
3.3 How the business and cultural environments shape the behavior of a selected organization
PESTLE analysis
Factors Affects
Political Increasing level of globalization has generated many challenges and
opportunity for the company.
Economic Increased level of competition in the retail sector has driven down the price of
the product.
Social Emphasis of government to promote healthy eating products due to increase
level of obesity has created an opportunity for the Sainsbury to manufacture
the related products (Osterwalder, Pigneur and Tucci, 2005).
Technological Use of latest technology in order to easily avail the goods and services to the
customers can prove to be one of the beneficial factors for the company.
Legal Financial burden of the company can increase due to the imposition of
various laws related to the packaging and labeling.
Environmental Lot of emphasis of western companies on reducing the carbon emission has
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increased the cost of the company because company need to now invest more
on green issues.
CONCLUSION
From the following report it is concluded that various internal and external environment
available in the business environment affects the organization both in positive and negative
manner. Therefore, it is also conclude that introduction of fiscal, monetary and competition has
also affected the sales and profitability of the company. At last it PESTLE analysis has been
conducted in order to find out the affects of culture environment on the company.
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REFERENCES
Books and Journals
Björklund, M., 2011. Influence from the business environment on environmental purchasing—
Drivers and hinders of purchasing green transportation services. Journal of Purchasing
and Supply Management. 17(1). pp.11-22.
Chi, T., Kilduff, P.P. and Gargeya, V.B., 2009. Alignment between business environment
characteristics, competitive priorities, supply chain structures, and firm business
performance. International Journal of productivity and performance management.
58(7). pp.645-669.
Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.
Czinkota, M.R. and et.al., 2009. International business (Vol. 4). Dryden Press.
Hill, C., 2008. International business: Competing in the global market place. Strategic Direction.
24(9).
Johnson, J.P., Lenartowicz, T. and Apud, S., 2006. Cross-cultural competence in international
business: Toward a definition and a model. Journal of International Business Studies.
37(4). pp.525-543.
Klapper, L.F. and Love, I., 2010. The impact of business environment reforms on new firm
registration. World Bank Policy Research Working Paper. (5493).
Morrison, J., 2006. The international business environment: global and local marketplaces in a
changing world. Palgrave Macmillan.
Osterwalder, A., Pigneur, Y. and Tucci, C.L., 2005. Clarifying business models: Origins, present,
and future of the concept. Communications of the association for Information Systems.
16(1). p.1.
Palmer, A. and Hartley, B., 2008. The business environment. McGraw-Hill.
Solomon, M.R. and et.al., 2014. Consumer behavior: buying, having, and being. Upper Saddle
River, NJ: Prentice Hall.
Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning.
43(2). pp.172-194.
Online
Sen, S., 2011. Market structure:Monopoly, Oligopoly, Monopolistic competition and Prefect
competition. Available through: <http://fintowin.com/2011/07/market-structure-
monopoly-oligopoly-monopolistic-and-perfect-competition>. [Accessed on 18th
November 2015].
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