The Unit 1 Business Environment Assignment – Sainsbury Plc paper will discuss the role of business organizations towards trade. Business organizations have different structures with different objectives to achieve and play an important role in the trade market. Various business organizations together develop a market environment in which business operates, fulfils its objectives and satisfies its customers. The present paper would elaborate the market environment, national environment create, business goals and focuses and factors affecting business operations in the context of Sainsbury Plc. A study of business environment is necessary to develop a market strategy and its successful implementation (Heizer and Render, 2003). Sainsbury Plc is a leading corporate of UK and has a stable market share in terms of growth. The objective of present paper is gain an understanding on the following issues:
- Business organizational purposes
- Nature of national and market environment
- Organizational behaviour in market environment
- Assessment of global factors shaping business activities in England
Thus, the study of the above topics will help in evaluating the overall business organization environment faced by the company undertaken in example i.e. Sainsbury Plc. A focused study of the environmental factors will help in developing a good and suitable marketing strategy for the organizational growth.
Task-1 Business Organizational purpose
P1.1 Explain briefly the following types of organizations and their purposes:
- Virgin Group Ltd
- Sainsbury Plc
- Mc Donald’s
- National Health Services (NHS) England
- A corner shop near where you live.
Business organizations are generally segregated into two segments which are private and public. Both types of organizations are found in UK in huge number. Private organizations are those on which there is a hold of individual and he personally would be liable for its debts. He may establish a business in collaboration with other individuals also but cannot take public or government interest in his business. These types of businesses include sole proprietorships, partnership concerns, private companies, joint ventures etc. On the other hand, public organization involves stake of public in its holding. Moreover, governments are also associated with this type of organization having generally vast scale of operations. Types and purposes of the organizations given above are as follows:
- Virgin Group Ltd.: A private company which is operating its business since last 50 years. Initially, it arranged its finance by issuing shares internally. No offer for subscription was made to the public. Moreover, the restrictions were imposed on the existing shareholders on transfer of their share to outsiders. Hence, the ownership was centred in few hands (Galloway, 2010).
- Sainsbury Plc: It is a public limited company of UK in which public is substantially interested. It started with a proprietorship concern and thereafter registered itself as a company. The company widely issued its share to public and distributed ownership.
- McDonald’s: This Company is working with its franchisee all over the world. This system makes easier distribution of the product and covers huge market network. Presently, McDonalds is a famous brand of food chain having its branches internationally. The franchisee system is suitable for these types of industries as anyone can its franchisee and can invest with a set up initially to associate with it. The company is using this system to reduce cost factor, to effectively manage distribution system and to establish a market place worldwide.
- National Health Services: This organization gets its funds to operate business through public participation. The main motto of these types of organizations is social service and not profit making. NHS was established with the goal of providing health services to public at large.
- A nearby corner shop: These shops generally operate small business with small investments. A single person generally owns the shop and handles its entire activities of his business. These types of shops are liberal to choose their own business models.
P1.2 Considering Sainsbury PLC, describe the extent to which it meets the objectives of its different stakeholders.
The person who is interest in the organization whether directly or indirectly will be deemed to be as stakeholder. Every stakeholder desires the organization to grow so as to directly affect their earnings. A business should develop its strategies to meet the requirement of its stakeholders. Sainsbury Plc also makes efforts to meet the desires of its stakeholders. Here, we would discuss the extent to which it became successful in doing so. The various stakeholders are:
- Customers: Customers play a vital role in the various decisions making process of the organization. They expect good quality product with low prices, value added customer services etc. The consumers should be given high importance by the company while drafting business policies. An organization can grow only if its customers are satisfied with its product and services (Slack, 2010).
- Shareholders: Shareholders have ownership of the company and has invested their funds in it. Being the owner of the company, management has to follow the instructions of the shareholders. They expect a high level of return on their investments. Thus, high profit distribution in terms of divided is expected by them. Sainsbury Plc satisfies its shareholders by providing moderate rate of return on their investments.
- Employees: Employees expect career growth in the organization and high remuneration as per their skill. Sainsbury has a huge staff employed all over the world and it meets the requirement of its employees to a great extent. Employee also expects knowledge about current the position of the organization in the market. So, they should be included in the information system also.
- Government: Government wants an organization to follow its rules and regulations. Moreover, it expects proper disbursement of tax liabilities of the organization. Thus, Sainsbury plc meets its government obligations timely by following its instructions.
- Suppliers: Suppliers expect timely payment of their dues and more purchases. Sainsbury plc also has a large number of suppliers. By fulfilling the expectations of suppliers, the company gets the supplies in time as and when required.
P1.3 Considering Sainsbury Plc, explain its various responsibilities as an organization and the strategies it employs to meet them.
There are many responsibilities that Sainsbury have to execute and have set of objectives which it has to achieve. The various strategies adopted to meet these objective and to meet the responsibilities are given as under:
- Responsibility towards Customers: Sainsbury has a sense of responsibility to its customers. These responsibilities include customer services with good quality product and at moderate price. For meeting this responsibility, Sainsbury has imparted training to its staff on customer relationship management skills so that customer’s satisfaction can be achieved to the maximum (Nordhaus, 2009).
- Responsibility towards shareholders: Shareholders are always keep to know the operational results of the organization, for this purpose, Sainsbury plc has managed to provide relevant financial results report for their clear understanding which are available on its website too. Shareholders expect growth of the organization and high return on their investments.
- Responsibility towards employees: Sainsbury plc has been complying with its responsibility towards its large number of employees by providing proper HR management policies, imparting training to enhance their skills and high remuneration according to their job. Employee satisfaction will lead to achievement of overall business objectives more efficiently.
- Responsibility towards society: Society in which an organization sustains, also expect a sense of responsibilities towards it. Sainsbury Plc is discharging its social responsibilities in the terms of legal, ethical, economical etc. Social responsibilities are need to be fulfilled for the smooth running of the business operations.
Task-2 Nature of national environment
P 2.1 Giving relevant examples, briefly explain how different economic systems
Different economic system allocates the human resources between stakeholders of the market. These economic systems include planned or command economy, free enterprise, mixed and transitional system etc. We shall here discuss these allocate the resources effectively in context of Sainsbury Plc as under:
- Planned or Command economy: Command economy always have command of government over the economic resources like capital, land, labour etc. only government have the entire hold of these resources of the economy and it possesses the whole information relating to them. This kind of economic system does not prove to be highly efficient in allocation of resources. There is always a lack of proper knowledge among staff and efficiency level in planning and judgments is also low resulting into improper decision making regarding allocation of resources. It leads to improper decision about production level, amount of resources available, any surplus or shortage etc. (Broady-Preston & Steel, 2012). Sainsbury Plc also feels difficulty in operating under such economy.
- Free enterprise economy system: In such type of economic systems, government gives a level of freedom to the enterprises in the economy. Government interference is low in allocating resources and it generally includes large number of small businesses. These enterprises are flexible to operate business activities and establish high market competition in market.
- Mixed Economy system: In mixed economy system, intervention from government is slightly higher than in free economy system and lower than command economy system. Fiscals and monetary controls are there to manage this kind of economy. This economy contains the advantages of the other two economies. This system is the most efficient system in allocation of resources. Sainsbury Plc frames its own policies to manage with government’s fiscal and monetary policies. The following figure depicts the mixed economy system
- Transitional economy system: It includes transition from planned economy to market economy. This economy is also considered to be highly efficient in allocation of resources. Prices of the products in this system are left upon market demand forces.
P 2.2 Considering Sainsbury Plc UK, assess the impact of fiscal and monetary policy on their activities.
Government uses fiscal and monetary policies to establish a control over the market activities. The policies are implemented by government keeping in view the prevalent circumstances. The various policies adopted by government are mentioned below:
- Variation in interest rate:Increase in interest rate will increase the cost of capital for the company and decrease in interest rate becomes beneficial for the company. The government varies the interest rates so as to affect the activities of business organization and to control economy as a whole. Low interest rate would lead to major benefit for the organizations in terms of cost factor and favourable profit margins (Allen, 2011)
- Variation in minimum maintenance of reserve: If government increases the reserve amount for minimum maintenance, people would deposit higher and spend comparatively low. The overall turnover of Sainsbury Plc tends to reduce in case of increase in reserve requirement and tends to decrease in case of decrease in reserve requirement.
- Exchange rate fluctuations: fluctuations in exchange rate affect the business decisions to a great extent. If the exchange rate of the country of supplier increases, it will automatically affect the decision relating to purchase and thus overall increase in purchase cost. Sainsbury plc trades in overseas too, hence, exchange rate fluctuations affects its business.
- Changes in Tax laws: Government has full authority to draw rule and regulations relating to tax. Any change in tax rate would affect the organization’s earnings and investments. A higher tax rate leaves a company with low production with low earnings. On the other hand, lower tax rate is favourable for the business investments.
- Government expenditure: government spending on a particular project leads to affect the business development. Any reduction in spending in a particular industry may create a difficult situation for the organizations like Sainsbury Plc to operate their business. Thus, government changes its decisions to affect the economy regarding expenditure to be incurred.
P 2.3 Explain the impact of competition policy and other regulatory mechanism on the activities of Sainsbury Plc UK.
Competitive policies and other regulations of UK affect the business activities of Sainsbury Plc. Their impact is discussed below:
Competitive policies: Sainsbury Plc faces a tough competition in the market as there are various other retailers selling the same product under similar situations. A high competitive market affects the business decisions relating to price of the product, area of distribution, providing value added services to consumers etc. The strategies adopted by competitors affect the business activities and may lead to frequent decision making at some time.
Impact of other regulations:Sainsbury Plc get affect with the various rules and regulations of UK government. Government changes its rules and laws to regulate the economy of the country (Gitman & McDaniel, 2009). The impact of these laws may be adverse or favourable depending upon the situation. If government regulates the industry by providing guidelines to maintain the quality of the product, it will lead to increase in production cost factor of the business. To tackle this situation, Sainsbury needs to adapt itself as per the government regulations time to time. It has to utilize its production efficiency in such an optimum manner so that it reduces the overall costs of the organization with higher standard product.
Task-3 Organization behaviour in market environment
P 3.1 Explain how market structures determine the pricing and output decisions of Sainsbury Plc UK.
The market structure affects the important decisions of the business operations in many ways. There are different types of market structure which impact the pricing and output decisions of Sainsbury Plc. These market structures depict the situation of the market on terms of domination. Some of the key markets structure that affect the decisions of Sainsbury Plc are given as under:
Monopoly Market structure: Monopoly is a situation where in the whole domination of the market is in one hand or other. There is only one player of the market who set the prices of the product to any extent for the purpose of earning huge revenues. Monopolists hold the market and operate it as they desire. The price and quality factor of the product remains in their hand and no other firm can affect its decisions or market strategies. Consumers are bound to pay higher prices to monopolists in this type of market structure as there is no other supplier of the same product with similar quality and considerations.
Oligopoly: This is a situation where the competition factors in the market are high. Prices are set by the organization keeping in mind the market share they want to sustain. The business decisions in this type of market structure are affected by top level competitive system.
Perfect competition: in this type of market structure, there are various sellers for a single product. The competitive level among the companies is its peak in this market structure. Prices of product remain stable and generally low so as to attract large number of customers. Sainsbury Plc is at present facing a tough completion in UK market retail shops, to manage this situation, the organization has to deal with high efficiency while making decisions (Martins and Terblanche, 2013). Prices are affected by demand and supply factors and the output quantity decisions are taken after considering the market situation. A company should develop effective market strategies to challenge the competitors and to efficiently sustain in the market by making profits.
P 3.2 Illustrate how market forces shape Sainsbury Plc UK responses using a range of examples
The markets forces needs to studies before formulating any market strategy and its implementation. These market forces affect the decision making process of Sainsbury Plc. Some of the market forces are elasticity in demand and supply of a product, consumer behaviours and perception, output cost etc. an organization has to follow a suitable market strategy to respond to these market forces. Some of the strategies followed by Sainsbury Plc are as follows:
- Cost and output effect: if the cost of a particular product increases, Sainsbury will make decision about the procurement of that product. This is because to verify that the organization may not sustain loss by sale of this product. These will include evaluation of overall profitability of the business.
- Demand and supply: Supply of the product should be on the basis of the demand for that production the market so as to keep the process stable. If demand for the product is high at a particular time, then Sainsbury would focus on to meet the demand of the consumers by increasing the supply.
- Economies of scale: for producing high volume of the product, an analysis of the economies of scale must be made in advance. Economies of scale have direct impact on the functioning of the organization which wants to produce in a high range. Sainsbury plc has also achieved economies of scale in order to produce high volume of products and to grow in the market.
- Customer perception and action: Consumer’s perceptions towards the product affect the actions taken by organization with regard to its sale. Mostly customers are highly sensitive to price of the product and easily switch over to the other supplier who provides them at cheap rates. An organization’s objective should be to provide good quality product without affecting it price (Scaner, 2009)
P 3.3 Explain how the business and cultural environmental shape the behaviour of Sainsbury PLC UK.
Various environmental factors affect the decision making of the organization. These factors include political factors, economical factors, social factors or technological factors etc. Business behaviour of Sainsbury Plc is also affected by these factors which are discussed hereunder:
- Political factors: political environment affect the policies of the business. Its stability has affected positively for Sainsbury Plc to develop market policies. The political environment of UK is stable; hence it acted positively for Sainsbury Plc to sustain in market. It framed its policies and decisions in accordance with prevailing political environment.
- Economic factors: Economical factors include factors affecting economic conditions of the market as a whole for e.g. variation in interest rates, exchange rate fluctuations, Government revenues and expenditure etc. UK has various favourable economic market conditions which has helped Sainsbury Plc in its business development.
- Social and cultural factors: Social factors generally include customer’s behaviour, expectations towards organization etc. Sainsbury has analyses its social market conditions as well before making important decisions with regard to its business. Cultural factors also affect the economy as a whole and its industries. The market policies of an organization must be coherent with social and cultural factors prevailing in the market.
- Technological Factors: changing in technology has a great impact on the functioning of the organization. An organization must keep itself updated with the changed technologies and should adopt strategies after making an analysis of current trend prevailing in the market. Sainsbury has used suitable technology for its business to enhance its efficiency (Kotler and Keller, 2010).
Unit 1 Business Environment Assignment – Sainsbury Plc has thrown light on business organizational purposes, international markets environment, and various external and internal factors prevailing in it etc. in the context of Sainsbury Plc. Being a public limited corporation, it has successfully established its market place globally. In addition to this, the present paper has discussed the various market structures an organization faces, significance of international trade, impacts of global factors on the business operations etc. Sainsbury makes its business policies after analysing the impacts of all these factors. Moreover, Sainsbury is following rules and laws of the country in which it operates its business so as to make its business to operate effectively and efficiency.
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Broady-Preston, J. & Steel, L. (2012).Employees, customers, and internal marketing strategies in LIS. Library Management, 23, 384-393.
Burnes, B (2009) Managing Change: a Strategic Approach to Organisational Dynamics, 5th edition, Harlow: Financial Times/Prentice Hall.