Impact of Brexit on Sainsbury's: A Business Environment Analysis

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Business and Business Environment
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Contents
Introduction.................................................................................................................................................3
Report 1.......................................................................................................................................................4
Introduction.............................................................................................................................................4
Task 1......................................................................................................................................................4
LO1 Explain the different types, size and scope of organisations............................................................4
Task 2......................................................................................................................................................6
LO2 Demonstrate the interrelationship of the various functions within an organisation and how they
link to organisational structure................................................................................................................6
Report 2.....................................................................................................................................................11
Introduction...........................................................................................................................................11
Task 3....................................................................................................................................................11
LO3 Use contemporary examples to demonstrate both the positive and negative influence/impact the
macro environment has on business operations.....................................................................................11
Task 4....................................................................................................................................................13
LO 4. Determine the internal strengths and weaknesses of specific businesses and explain their
interrelationship with external macro factors.........................................................................................13
Conclusion.............................................................................................................................................15
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17
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Introduction
The success and sustainability of the organization purely depends on the factors in the business
environment of the organization. The external and the internal factors of the business
organizations exhibit both opportunities as well as challenges for the organizations. Hence it
becomes relevant for the management of the organization to conduct a detailed and continuous
analysis of the business environmental factor to retain the competitiveness and sustainability of
the organization. The given scenario highlights the case of the organization Sainsbury which is a
leading super market chain in UK and has its branches throughout the world. It has a good
competitive advantage, reputation, brand image and customer loyalty (Hamilton and Webster,
2018).
The scenario presented highlights the challenges related to the withdrawal of UK from the EU
membership. The EU is an association which enables the smooth functioning of the business
operations throughout the world. It plays an important role in establishing morality, welfare etc
in the business environment through implementing reduction in the tax rates, vat charges,
policies and procedures for fair trading etc. Hence the withdrawal of the UK from EU
membership can cause operational difficulties to the retailers of UK. This report speaks about the
business environment of Sainsbury from the point of view of BREXIT environment manager of
Sainsbury.
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Report 1
Introduction
Being a BREXIT business environment manager of the organization Sainsbury it becomes my
responsibility to highlight the operations of the organization to the shareholders of the
organization. Since the current political situation of the organization which is the decision of UK
to exit from the EU has put the shareholders into a panic situation. This situation reduces the
profit margin of the Sainsbury which can directly or indirectly impact the shareholders. Through
this report I validate the operations of Sainsbury which enables the shareholders to forecast the
future and estimate the potential of the organization.
Task 1
LO1 Explain the different types, size and scope of organisations
The Sainsbury is a large super market chain in UK. This session of the report highlights the types
of the organizations with whom the Sainsbury maintains business relationships in order to make
its operations sustainable. The size, scope, sector, legal structures of these organizations are
discussed here which enhances the credibility of the operations of Sainsbury.
 Sole Traders: The Sainsbury has its own distribution channel throughout the world and
holds the sole proprietor ship in almost all markets in which it is operating. When
considering its supply chain the organization holds the sole traders like the Arcadia
groups, Austin sugar man etc. which holds a good reputation in the markets. Since these
suppliers are having good credibility and brand image in the market it extends the scope
of the Sainsbury and also its reputation. The size of these sole traders ranges from the
medium to small which also reduces the operations costs of the Sainsbury. The key
objectives of these suppliers are to provide quality products and services to the Sainsbury
and to maintain long term relationship with it. Since the organization Sainsbury is
providing priority to the legal implications of the supply chains, the legal structure of the
sole traders are bound to the contracts, agreements etc. (Young and Bologna, 2016).
 Small and medium enterprises: The organization also accepts supplies from the local
farmers for its agro products, small suppliers of the cakes and bakery products. This
organization has also backed up its supply chain with the federation of Bakers and the
Forum of Private Business which enables it to meet the demands of the customers with
sufficient products and services. This supply chain strategy of the organization makes the
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local suppliers happy as well as the objective of meeting the demand is also achieved.
The scope for these local suppliers is gaining popularity in UK due to the increase in the
competition in this sector. The withdrawal of the UK from the EU has turned the
attention of the super market chains towards the local small and medium suppliers for
retaining the profit marketing. The legal implications related to the partnerships with the
small and medium organizations are lower when compared to large corporate. This factor
enhances the scope for these suppliers for the organization Sainsbury.
 Private: The organization Sainsbury extends its partnership with private organizations
through merging and acquisitions. ASDA is the supermarket chain which is operating in
UK. The Sainsbury has merged its operations with this private organization in order to
extend its business operations in UK and in other parts of the world. Another private
organization is Vodafone. The organization enters into partnership with the Vodafone in
order to establish its business operations in the mobile network industry. These two
organizations ASDA and Vodafone are large scale corporate organization which
enhances the corporate values and the competitiveness of Sainsbury. The scope of these
partners in its business environment is higher which enhances the scope for Sainsbury.
These suppliers follow corporate legal structures which has its own legal advisors. The
key objectives of these organizations are to establish their dominance in its business
environment and to enhance their profit margins. It also holds partnership with the
pharmaceutical suppliers for extending its business operations to the Medicare sector.
When considering the partnership the organization Sainsbury holds more than 1000
private partnership which belongs to the small, medium, large and corporate organization
types (Cherdantseva and Hilton, 2015).
 Public: The organizations Sainsbury also holds partnerships with the public or
government organizations operating in UK as well as in other parts of the world. Imperial
college of London is the public institution which is operating in UK. This partnership
enables the organization Sainsbury to conduct detailed research and analysis on the
carbon footprint in its business operations. It also holds the partnership with the public
sector organizations like the government authorized organizations. The purpose and key
objectives of these public sector organizations includes enhancing the public welfare,
enhancing the GDP of the country etc. Through the partnership with the imperial college
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London the Sainsbury could reduce its carbon impact over the business environment and
could contribute to its corporate values. The legal structure of these public sector
organization is as per the rules and regulations, laws etc. prevailing in UK
 Voluntary: The organization Sainsbury extends its collaborations with the local charity
organizations existing in UK. It also has established the partnerships with the voluntary
organizations like NHS, WTO etc. which focuses on the welfare of the society and the
trading in UK. This partnership has enabled the organization to maintain its corporate
social responsibility which is very vital for achieving the competitive advantage and
sustainability. The purpose of these voluntary organization is to generate awareness about
health and related issues in the society and hence to ensure a healthy society. The scope
of these voluntary organizations enhances the scope of Sainsbury in UK and in other
parts of the world (Mellor, 2018).
 Sectors: The sectors in which the partners of the organization Sainsbury belongs to the
primary, secondary as well as the tertiary sectors of the business environment. The
suppliers like the farmer’s supplies raw materials and hence fall under the primary sector
of the business environment. The suppliers like the Austin sugar man supplies the
finished products to the Sainsbury and hence falls under the secondary sector of the
business environment. The partners like the Vodafone falls under the tertiary sector of the
business environment.
Task 2
LO2 Demonstrate the interrelationship of the various functions within an organisation and
how they link to organisational structure
The organization structure can be defined as a system or frame work of an organization which
highlights the ways or the direction through which it attains its goals and objectives. Each
organization adopts its organization structure considering its functions and objectives. An
effective organization structure enhances the information flow, communication within the
organization and hence enhances the objective achievement. Sainsbury being and international
organization and possess differentiated product lines the selection of the organizational structure
is very important for it. The organization Sainsbury deals with financial services as well as food
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Board of Directors
General Manager
Retailing Financial services
Sales Administration HRMMarketing
Manager ManagerManagerManager
Team MembersTeam MembersTeam MembersTeam Members
retailing. Two organizational structures have been analysed here considering the Sainsbury as a
food retailer as well as a financial service provider (Maduenyi et al, 2015).
Functional Organizational Structure
The functional organizational structure is the traditional top-down hierarchical organizational
chart. According to this organizational structure, the information and the authority flow from the
top to the bottom. In this organizational structure the employees with similar skill sets are
grouped into one division. This will follow a hierarchical structure from the top management,
board of directors, managers, supervisors etc. (Miśkiewicz, 2017).
The functional organizational structure can be implemented for the organization Sainsbury. An
organizational chart has been prepared as per the functional top down organizational structure.
Functional organizational structure of Sainsbury
According to this organization structure Board of directors and the general manager forms the
top management of Sainsbury. The operations of Sainsbury, the financial services as well as the
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retailing is managed and controlled by the general manager. The functions of the organizations
like the marketing, sales, administration; HRM etc are clubbed separately according to this
organizational structure. Under this organizational structure each function has manager, and team
members. Each functional group has to manage the retailing as well as the financing services.
Interrelationship between the functions of the organization Sainsbury as per this organizational
chart is discussed below (Coccia, 2015).
The functional organizational structure is directly linked to the functions of the organizations
Sainsbury. Since this organizational structure follows a hierarchical model the power and
authority is also distributed in the same manner. The primary interrelationship is that the
objective of each department is to achieve the organizational goal effectively. Here the
interrelationship is established by the general manager who possesses a common access and
authority to all departments. This functional organizational structure enables the organization to
delegate the functions of the organization to the specialists. For example the employees
proficient in marketing can market better and are clubbed together in this organizational
structure.
The interrelationship starts when the managers of each department communicate with the top
management about the need and requirements related to their departments. Effective
interrelationships can be identified when the managers of each department is interacted formally
and informally to meet the requirements of each departments to reach the goals effectively. This
hierarchical model establishes a disciplined and effective communication which is relevant for
the maintenance of effective interrelationship.
The drawback of this organizational structure is the difficulty of the employees to work in other
departments during job rotation. The communication process is hierarchical and hence can be
time consuming which can delay the critical decision making.
Divisional Organizational Structure
The divisional organizational structure reflects the product specific organizational structure. This
organization structure also follows a hierarchical approach where the communication and the
power flow from the top to the bottom. Each division in this organization chart has its own
function. Through this kind of organizational structure one division will become independent of
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Top Management
Finance Services
HRM
Marketing
Finance
Purchase Purchase
Marketing
Retailing
HRM
Finance
the other and could operate together to achieve the organizational goals (Young and Ghoshal,
2016).
Considering the two operations of the organization Sainsbury, retailing and financial services the
divisional organizational structure has been applied to it. An organizational chart has been
developed for Sainsbury according to the divisional organizational structure.
The Divisional organizational structure of Sainsbury
When the organization Sainsbury is taken into consideration it is an international organization
and holds different product lines like retailing, financing services etc. The divisional
organizational structure enables Sainsbury to focus more of each specific functions and real the
goal of each function specifically. Since each division has its own functions like purchase,
financing, HRM, the operations will be division oriented and hence make the operations result
oriented. The divisional organizational structure also makes the decision making process more
specific and effective. Since the organization Sainsbury also possess international operations the
divisional organizational structure would benefit it in excelling in each one of its product lines.
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When considering this divisional organizational structure the interrelationship between each
department is higher than the traditional functional top down organizational structure. Since each
division has its own functions which includes marketing, operations, purchasing, customer
service, etc each departments provides inputs to the other department in order to reach the
divisional goal effectively (Clegg, 2017).
For example the marketing department of the retailing division of the Sainsbury has an estimate
regarding the future demands of the customers in their super market. This estimate or forecast is
given as the input to the procurement department so that they can make necessary arrangements
for meeting those demands. This highlights strong interrelationship between the departments
which operates towards the overall goal achievement.
The divisional organizational structure enhances the competition of the organization through
enhancing the accountability and also through shaping organizational culture. Since it makes the
decision making process more effective it can yield success for the organization.
The drawback involves the cost incurring in formulating and maintaining the divisional
organization structure. The internal conflicts which can take place within the workplace is
another disadvantage.
Conclusion
Defining the scope, sector, objectives, etc. of the partners involved in the supply chain and in the
distribution channel can estimate the strength and the potential of the organization. This report
clearly highlights some potential partnership organizations of Sainsbury which includes small,
medium, corporate organization from three different sectors. The evaluation highlights that these
organizations enhances the scope and opportunities of Sainsbury. The report also analyzes the
operations of the Sainsbury considering two products retailing and financing services through
considering two organizational structures functional and divisional. This report also reveals the
interrelationship of each department in Sainsbury and its contribution to the overall goal
achievement (Jensen, 2017).
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Report 2
Introduction
Sainsbury is a leading super market chain operating in UK and also act as a market leader. This
organization holds different product lines and services like retailing, pharmaceuticals, financial
services, networking etc. It holds a market share of 15.7% which makes it a strong competitor for
the organization Tesco. The decision of UK to exit from the EU has impacted the operations of
Sainsbury as well as other retailers in UK. The impact of the BREXIT over the operations of
Sainsbury has been evaluated through this report through performing the Pestle analysis and
SWOT analysis. This provides a clear understanding about the present situation of the
organization and can be helpful for the further decision making process (Dhingra et al, 2016).
Task 3
LO3 Use contemporary examples to demonstrate both the positive and negative
influence/impact the macro environment has on business operations
The external environment of the organization Sainsbury has been performed with the scientific
management tool PESTLE analysis. Both positive and negative impact of the BREXIT over the
external factors of the organizations Sainsbury has been analysed and evaluated here.
Political: The exit of the UK from the EU membership has predicted some upheaval in the
political situations of UK and some uncertainties. This has impacted the operations of the
Sainsbury in critical manner. Handling the political barriers while operating in the international
markets has become a big challenge for the Sainsbury without the protection, codes of conducts
etc of the EU. The business relationship of Sainsbury with the nations which are still the member
of UK has been interrupted through the entry of BREXIT.
The positive impact of the BREXIT over the Sainsbury is the direct government involvement and
support in performing the business operations nationally and internationally. It could make
decisions by only considering the rules and regulations kept by the UK government rather than
being bound to the common rules of the EU.
Economic: The major economic impact of the BREXIT is the massive inflation, depression in
the wage growth of the population, sluggish economy etc. This has impacted the buying
behaviour and the buying potential of the consumers of the Sainsbury. This resulted in the
decrease in the sales as well as decrease in the profit margin. Another negative impact of the
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BREXIT is the anticipating currency hedges which can hit the operations of Sainsbury as it is
dealing with agro take over as its major supplies. The organization has to provide its products
and services at relatively lower prices in order to be competitive and to attract the customers.
This has narrow down the profit margin of the organization (Wadsworth et al, 2016).
This depression in the economic situation in UK has impacted the operational decision making of
Sainsbury. The management was forced to formulate competitive strategies, make critical
decisions on the discounting, wages, human resources etc. The merging of the Sainsbury with
ASDA is a critical decision which has been taken by Sainsbury after the BREXIT.
Social: Since the BREXIT has resulted in low wages and high inflation in UK the spending
power of the population of UK has been declined. This has impacted the retailing operations of
Sainsbury. The potential customers have stopped their weekend shopping in the Sainsbury
supermarket which reduced their profit margin. The strategy of lowering the prices may also
generate an impression of compromising in the quality of the products in the society. This is a
negative impact which the organization Sainsbury cannot control.
The positive impact highlights the rising demands of the organic food in the UK market. Since
the organizations Sainsbury have organic food suppliers from the local market, it can take this
demand as the advantage. Since these suppliers are local or national the impact of the BREXIT is
less. Hence the BREXIT intervention has also enhanced the relationship of the Sainsbury with
the local farmers and raw material suppliers.
Technological: The organization Sainsbury holds a considerable online presence which has
enabled it to compete in the market even after the impact of the BREXIT. It offers online
retailing where the customers can order online and can pick up the orders from the nearest retail
stores. This has enabled the organization to earn profit through proper customer service and
being responsive. The impact of the BREXIT over the technological revolution in the
environment of Sainsbury is lesser. Even though the costs incurring in the development and
maintenance of websites and ecommerce has gone up due to BREXIT, the Sainsbury could
manage the technological factors with the support of the loyal online customers (Lawless and
Morgenroth, 2019).
Environmental: The exit of the UK government from the EU has made it mandatory for the
organizations like the Sainsbury to cope with the rules and regulations of the UK government.
This situation has enabled the Sainsbury to make decision which supports the environmental
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