Business and Business Environment: Sainsbury's Case Study

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BUSINESS AND BUSINESS ENVIRONMENT
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Contents
LIST OF FIGURES..........................................................................................................................................3
INTRODUCTION...........................................................................................................................................4
LO1..............................................................................................................................................................5
P1.............................................................................................................................................................5
P2.............................................................................................................................................................7
M1...............................................................................................................................................................9
LO2............................................................................................................................................................11
P3...........................................................................................................................................................11
M2.........................................................................................................................................................13
LO3............................................................................................................................................................15
P4...........................................................................................................................................................15
M3.........................................................................................................................................................16
LO4............................................................................................................................................................18
P5 AND M4............................................................................................................................................18
P6...........................................................................................................................................................20
CONCLUSION.............................................................................................................................................21
REFERENCES..............................................................................................................................................22
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LIST OF FIGURES
Figure 1: Sainsbury Logo..............................................................................................................................4
Figure 2: PESTLE Analysis...........................................................................................................................17
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INTRODUCTION
Business can be defined as the process of trading goods or services for the purpose of profit. The
business environment can be defined as the atmosphere in which the business operated. Both business
and business environment holds a strong impact on one another (Pulver, 2012). There are various types
of business organizations which exist in a business environment.
Through this report, a highlight on the various types of profit and non-profit organizations has been
given and their area of operations has been determined. This report would also cover the relationships
of the business organizations with their stakeholders and their impact on the decisions taken by the
firm. The report would also assist in understanding the impact of the factors that are present in the
macro environment of a firm and the importance of studying the factors of the internal and external
environment for a business organization.
Sainsbury is one of the largest supermarket chains in the UK which was established in the year 1869 and
is currently headquartered in London. The firm operates in the retailing industry and aims at providing
food at a reasonable price to the customers (Sainsbury, 2019). The competitors of Sainsbury include
Asda, Tesco, etc. it is considered as one of the largest retailers of groceries in the United Kingdom and is
located at more than 1400 locations in the UK.
Figure 1: Sainsbury Logo
[Source: Sainsbury, 2019]
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LO1
P1
There are various types of business structures that are present in the business environment, which can
majorly be classified into the following:
 Private Sector
The private sector of business comprises of those organizations that are privately owned by
certain individuals or deemed individuals and there is no external interference in the decisions
taken by these firms (Heres and Lasthuizen, 2012).
Purpose: The main purpose of these organizations is to maximize the profit through their
operations and grow at a rapid rate. For example, Sainsbury is a private sector organization
which is one of the largest retailers in the UK.
 Public Sectors
Public sector compromises of those organizations which are wholly or partially controlled by the
government or state of a nation. In these types of organizations, the decisions are hugely
influenced by the government of the country and are involved in conducting the operations of
the firm (Bouckaert et al., 2016).
Purpose: The main purpose of these organizations is to regulate the businesses in the economy
for the benefit of the citizens and to take the major decisions on behalf of the country. These
organizations focus on providing easy access to certain services which are controlled by the
government. For example, the British Council is a public sector organization which focuses on
the creation and development of educational and international cultural opportunities.
 Voluntary Sectors
Voluntary sector organizations include those firms which are formed not for the purpose of
profit but to work for the benefitting the society as a whole (Anheier and Seibel, 2013).
Purpose: The main purpose of these organizations is to create a better society and help to
contribute to the welfare of society without having a focus upon the generation of profits. For
example, the Wellcome Trust is one of the largest voluntary trust working for the benefit of
society by improving the health sector of the country.
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In the aforementioned types of organizations that are present in the business environment, there are
various types of legal structures based upon which these organizations can be formed, which have been
described in the following:
o Sole Proprietorship
The sole proprietorship is one of the most basic legal structures of an organization in which the
entire business is controlled by a sole trader. In this form of business organization, the entire risk
is borne by the trader and thus, the entire profits are relished by the same person (Baden-Fuller
and Mangematin, 2013). The investment costs and operational costs are incurred by the sole
individual as well and the entire right of taking decisions on behalf of the firm lies with the sole
proprietor.
o Partnerships
In this form of the legal structure of organizations, the business is divided into two or more
partners, who together contribute capital for the establishment of the business and the profits
are divided among the partners at a specified ratio (Fielt, 2014). The decisions regarding the
operations are taken with the consent of all the partners and the risks are borne by the partners
on the basis of the contribution of capital on their respective behalf.
o Private limited companies
Privately limited companies are a form of legal structure which is formed by the law as an
artificial person, under the name of which the business operations are being conducted. As a
private limited company, the organization and the individuals owning it are different from one
another (Craig and Campbell, 2012). The operations are performed by the name of the company
and the owners are provided by a specific return as specified in the legal documents which are
made at the time of formation of a company.
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P2
The business organizations can also be divided on the basis of Micro, Small, Medium and Large
enterprises, which have been differentiated in the following table:
POINT OF
DIFFERENCE
SMALL ENTERPRISES MEDIUM ENTERPRISES LARGE ENTERPRISES
Definition In these types of
businesses, operations are
conducted by 50 or fewer
employees (Berisha and
Shiroka Pula, 2015).
In these types of
businesses, the
operations are conducted
by more than 50
employees but less than
250 employees.
In these types of
organizations, the
operations are
conducted by more
than 250 employees.
Objectives The purpose of this type of
organization is to meet the
basic requirements through
the generation of profits.
The objective of this
business is to sustain in
the market by trading the
products and services
and tap growth
opportunities.
The purpose of these
organizations to gain
huge profits and expand
their business into
diversified areas (Watts,
2018).
Market Share Small enterprises hold a
small market share as an
individual firm but as a
whole, they hold a huge
market share in the local
markets.
Medium enterprises hold
a medium market share
in the business
environment (Hillary,
2017).
Large enterprises hold a
huge share in the
business market and
contribute the highest
through their high
returns.
Profit Share The profits received by the
small enterprises are lower
and are mostly kept by the
owner to himself.
Profits received by the
medium enterprises are
higher than small
enterprises but are not
huge in respect to the
large enterprises.
The profit share of large
enterprises huge and
are divided among the
owners of the firm
(Watts, 2018).
Growth The growth opportunities
for small enterprises are
Medium enterprises hold
huge opportunities for
Large enterprises also
hold huge growth
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lower due to their small
area of operation (Hillary,
2017).
growth as they hold the
opportunity to expand
their areas of operations.
opportunities by
diversifying their
business and tapping
new customer markets.
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M1
The different types of organizations that exist in the global market adopt different types of
organizational structures through which higher efficiency can be gained from the operations (Pulver,
2012). International organizations hold a huge scope of development as they have the reach to potential
customer markets and are able to maximize their profits by expansion of their businesses. Based on the
structure of the organization, it can be divided into the following forms:
 Franchising
In franchising, the holder of the brand permits the franchisee to make use of the brand name for
carrying out the business (Hoy and Stanworth, 2014). In this form of business, the objective of
the franchisee is to run an independent business under the name of the company owning the
brand.
 Joint Venture
Joint venture can be defined as the organization which has been formed by pooling of resources
by two or more organizations so that a new organization can be formed. These ventures are
formed for either completion of a new project or for carrying out a business activity (Shishido et
al., 2015).
 Licensing
Licensing refers to providing the consent to produce the goods under a specific brand name. In
licensing, the owner of the brand permits the licensee the right to use the intellectual property
owned by the licensor to produce goods or to provide services (Cavusgil et al., 2013).
The different types of industrial structures also have an impact on the objectives and scope of an
organization, which have been described in the following:
 Perfect Competition
In this type of industrial structure, there are numerous firms in a market and the firms sell
similar types of products (Carraro et al., 2013). This industri8al structure influences the
organization in framing objectives such that it provides competitive product in the market and
relish the hold over deciding the prices of the product.
 Monopoly
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In this type of industrial structure, the firm is a single product/service provider in the market and
operates with an objective of maximizing the profits by having the entire hold over prices and
controlling the barriers to entry and exit of firms in the industry (Allen, 2013).
 Monopolistic Competition
In this type of industrial structure, differentiated products are provided by the firms and thus
the objectives of organizations are framed so that they can influence the customers in preferring
its products over that of the competitors (Parenti et al., 2017).
 Oligopoly
In this form of industrial structure, the market is controlled by the limited number of firms and
thus the objectives of these firms are framed such that they can dominate the market by setting
prices according to them whether the products are differentiated or not (Cavusgil et al., 2013).
There are various other factors in the business environment as well that impact the objectives and scope
of the firm. The objectives of the organization shall be set in a manner that the interest of the
stakeholders is secured and their expectations can be fulfilled. Other than this, an organization’s scope is
also affected by the situation of supply and demand of products existing in the market so that they can
determine their operational levels.
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LO2
P3
There are different types of organizational structures that are present in the business environment. The
structure followed by the organizations depending upon their scope and size can be divided into various
types, some of which have been described in the following:
 Bureaucratic Organization
This structure of an organization is generally followed by huge organizations wherein a high
amount of formality is followed in the organization. This structure is highly organized and strictly
follows the organizational chart made for each department (Jones, 2013). Authorities in this
form are controlled by the top level of management and layers of management are formed
based on a hierarchy of power. Through this form, the objectives of the firm are easily achieved
by streamlining the entire process of achievement.
 Post-bureaucratic Organization
This type of organizational structure follows a rigid hierarchy, wherein providing the flexibility of
adopting the new changes in the techniques. This organizational form allows the organizations
in the achievement of its objectives easily by using innovative measures of improving the
operational process and increases the scope of growth for an organization (Huczynski et al.,
2013).
 Matrix Organization Structure
In this type of organizational structure, a mixture of two or more organizational structure is
followed by the firm so that it can generate benefits from the application of all types of
organizational structures (Janićijević, 2013). Through this form of organizational structure, the
assistance of all different forms is taken for the achievement of the objective of the
organization.
 Strategic Business Units
In this form of organizational structure, distinct business units are established by the
organization so that instead of being concentrated by principal management, it can promote
flexibility in decision making and control of management (Robbins and Judge, 2012). This is
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