This is solution of HND Business environment UK Assignment given in UK College of business and computing.
Behind existence of every business organisation there is a specific objective. Depending on the type of organisation the objective might differ accordingly. For example for an NGO the motive is not to earn profit but provide support and services in some specific area to needy people. Whereas multinational corporations such Sainsbury’s have profit as the primary objective. At times organisations stumble in the path of growth as they are not clear about their objective. Hence it is important that organisations should be clear with their objectives and purpose which they want to achieve. Core purpose of this task to understand the core purposes of the business organisations through example of Sainsbury’s PLC which is based in United Kingdom.
P 1.1. Considering Sainsbury’s PLC, describe the extent to which it meets the objectives of its different stakeholders.
No business organisation can exist without stakeholders. Stakeholders play an important roles in the growth of a business. Every stakeholder has specific objective which he wants to fulfil through getting associated with the business. Hence it is important for the business organisations to fulfil these objectives.
Similarly Sainsbury’s also has several internal and external stakeholders associated with it. In order to fulfil objectives of these stakeholders Sainsbury’s takes different steps such as:
‘Healthier baskets for its customer’ programme: Through this initiative Sainsbury’s tries to ensure that most popular food items which are purchased by its customers less on fat, sugar and saturated fats. Thus through this Sainsbury’s has been able to meet its customer’s objective of buying healthy foods (Cherunilam, 2010).Snapshot from Sainsbury's Annual Report regarding the way it meets the objective of its various stakeholders.
Sourcing with integrity: Sourcing of the raw material for the final product along with finished goods has been an important aspect of Sainsbury’s. This is especially important for stakeholders such as customer and the suppliers. Thus through its various sourcing strategies Sainsbury’s has ensured that it sources the best quality products at a price which is beneficial for both suppliers as well as end customers.
Environment: Environmental aspects is also an important stakeholder which gets affected by the way business organisation functions. In case of Sainsbury’s it has been working towards a healthier environment through various initiatives such as reduction of CO2, focus on packaging optimization etc.
Communities: Sainsbury’s has dedicated corporate social responsibility team which focuses on achieving objectives that are associated with the communities as a stakeholders. That is why it has been consistently supporting various local communities and enabling them economically through job creation etc.
Thus it can be observed that how multiple stakeholders have different objectives from the business. That is why in current business environment it has become important that
P 1.2 Considering Sainsbury’s PLC, explain its various responsibilities as an organisation and the strategies it employs to meet them.
In UK’s retail sector after Tesco, Sainsbury’s is the second largest retailer today. That is why functioning of Sainsbury’s has impact on various types of stakeholders. Being one of the top supermarket chain retailer Sainsbury’s also has various responsibilities towards various entities associated with it directly or indirectly (Wetherly & Otter, 2014). These responsibilities are as follows:
Fair and ethical business practices: being second largest retailer in UK, Sainsbury’s has this responsibility to ensure that it promotes a fair and ethical business practices in the retail sector.
Contribution towards environment and communities: Every business organisation creates an impact on the community and the environment. That is why for Sainsbury’s it is necessary to ensure that fulfils its responsibility of promoting green and clear environment, and its contribution towards community by creating new jobs etc.
Support to government regulations: British government has various rules and regulations to ensure that various business organisations functions in an ethical and legal manner. However business organisations are equally responsible for this to ensure. Hence Sainsbury’s should ensure that it follows all the rules and regulations established by the government. (See here UKCBC Business Environment Assignment)
Environment in which a business operates plays a crucial roles in its growth, expansion and diversification. In this context, national environment is a major factor which impacts a business organisation. State of economy, various polices, and regulatory framework etc. are some of the important aspects which creates a business environment at national level. This task will analyse all such factors and overall environment which impact a business organisation such as Sainsbury’s.
P 2.1 Giving relevant examples, briefly explain how different economic systems such as: command, free enterprise, mixed and transitional systems attempt to allocate resources effectively.
No Business environment can exist without having some or the other type of economic system. Economic system are essential components of a business environment which ensures a smooth functioning of entire economy and various business organisations existing in it. Resource allocation is a critical activity which takes place in every economy system. This activity is an indicator of how well an economy is doing (Morrison, 2011). Following are the economy systems and the way resource allocation takes place in them.
Free Enterprise Economy System: In such economy system, demand and supply are the sole driver behind the resource allocation. Since private companies are the one which dominates this type of economy system, hence they take decision regarding how much resource to allocate for production of a particular product or services. Countries such as United States, United Kingdom, and Japan etc. can be categorized as the one having this type of economy system.
Mixed Economy System: In mixed economy system, both private companies as well as planning authority of government plays an important role in the resource allocation. Based on the important or resource to the nation resource allocation is handled by the government. On other private sector companies take their decision for resource allocation on the basis of demand in the market. India is one such country which has this type of system.
Command Economy System: In such economy system government plays the major role in the resource allocation. Mostly government creates a planning authority of commission, which looks after the resource allocation. In such system factors such as profitability or demand supply are not the primary reason for decision on resource allocation. In fact majority of the decision at times are influenced by socio-political condition of the country or the region. Iran is one such example where command economy system is prevalent.
P 2.2 Considering Sainsbury’s PLC UK, assess the impact of fiscal and monetary policy on their activities.
Fiscal and monetary policies are two tools which is frequently used by government and other authorities to either stimulate or control the economy. These policies are crucial for performance of the businesses existing in an economy system. Poor policies can also lead to situations such as economy recession etc. That is why it is important for business organisations such as Sainsbury’s to completely understand these policies and accordingly should create their strategy. However there are various examples where these policies have resulted into significant impact on the business. For example decision related to interest rates has major impact on organisation such as Sainsbury. Interest rate increase or decrease by the Bank of England is one policy through which it controls the supply of money in the market. Thus its decision of reducing interest rates means that an organisation such as Sainsbury’s need not to wait for investment from investors (Halbert & Ingulli, E. 2011). It can accordingly take loan from the bank in order to give impetus to its diversification and further expansion.
Similarly performance of the national currency i.e. GBP is also another important policy which causes major impact on the performance of the business. For example at times due to economy volatility currency grows weak compared to other strong currency such as USD. This means that for importing an item from an outside supplier Sainsbury’s has to pay more amount, which impacts its profitability as the overall margin on the product reduces significantly.
It can be said that both fiscal as well as monetary policies play an important role in the success of the business.
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P 2.3 Explain the impact of competition policy and other regulatory mechanism on the activities of Sainsbury’s PLC UK.
Competition is an important aspect of a healthy business environment. However if the same competition becomes unregulated in nature then it can lead to chaotic market conditions. That is why every country or region in majority of the cases has a dedicated competition policy. Purpose of the competition policy is to promote healthy growth of the market in such a way that all the business organisation have fair chance to grow and diversify. Similarly in UK there is Competition Commission which focuses extensively on implementation of various completion policies which has been developed over a period of time.
These policies have impacted a business such as Sainsbury’s as well. For example Competition Test policy which was implemented by Competition Commission in 2007-08 ensured that there are hurdles in path of rapid expansion of the supermarkets in a specific region. This was important to implement since companies like Tesco and Sainsbury’s dominate the smaller businesses which is not good for the health of the economy. That is why even Sainsbury’s performance got impacted, as it was not allowed to open new stores to prevent monopolization of the market (Hopkins, 2011). Similarly there are other acts as well such as Fair Trading Act, Resale Prices Act etc. which are implemented from time to time in order to regulated the market.
Market environment decides the way how an organisation behaves. Market environment consists of various factors having significant impact on the way a organisation prepare its business strategy.
P 3.1 Explain how market structures determine the pricing and output decisions of Sainsbury’s PLC UK.
Market structure can be defined as collection of various factors which are responsible for influencing the business functioning within the business environment. There are four types of market structure and each market structure has its unique way of determining the pricing and output decision for a particular business organisation.
Perfect Competition: In practical aspect this type of market structure is impossible to achieve. However theoretically in such market structure there are several competitors who deal with similar products and services. Entry barrier is relatively low in this type of market structure.
Oligopoly: In such type of market structure number of competitors are relatively low, and whatever few competitors are there in the market structure, they have a dominant position in the market. In order to maintain the dominance, the entry barriers in such type of structure remains high.
Monopoly: Such type of market structure is completely dominated by a single business organisation and has complete control of the market. All the demand and supply related decisions are driven by the dominant business organisation in this market.
Monopsony: In this type of market structure, there is only a single buyer who gives direction and controls the demand factor and pricing related decision in the market.
Sainsbury’s can be categorized under an oligopolistic market structure. UK’s retail sector is dominated by few major business organisations such as Asda, Sainsbury’s and Tesco etc. In such case pricing and output decision of Sainsbury’s is driven by its competitor’s strategy. The output or the production of the end product depends completely on the demand and supply factor existing in the market. Pricing strategy of Sainsbury’s is focused on rationalisation of it to a level where it can compete with other business organisations such as Tesco etc.
P 3.2 Illustrate how market forces shape Sainsbury’s PLC UK responses using a range of examples.
Five market forces which are used on the basis of Porter’s five forces model helps in understanding how market forces have shaped Sainsbury’s response.
These factors are:
- Bargaining power of customers
- Threats of new entrants
- Threat of substitute products
- Bargaining power of suppliers
- Degree of rivalry within the industry
Sainsbury’s holds second position after Tesco in UK’s retail sector. Considering each market force, it can be said that it has significant impact on Sainsbury’s. For example threat from bargaining power is relatively high since customers today have plenty of choices in form of Tesco, Asda, Marks & Spencer’s etc. Threat from new entrants is relatively low as the retail sector of UK has already reached its stagnation and is already crowded by several retailers. Sainsbury’s has low threat from bargaining power of its suppliers due the fact that it has more than 500 dedicated suppliers who works only with Sainsbury’s. That is why chances of a supplier shifting suddenly to other competitors is less. However degree of rivalry within industry is extremely high. This can be understood by the way companies such as Tesco, Asda, and M&S etc. are expanding aggressively.
Hence it can be said that market forces are crucial for organisations as they give direction to the strategy which a business organisation wants to implement in the market.
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P 3.3 Explain how the business and cultural environments shape the behaviour of Sainsbury’s PLC UK.
Both business as well as cultural environments have major impact on the behaviour of an organisation like Sainsbury’s. Shopping in a supermarket has become a part of life today. Unlike past when majority of the general merchandise was purchased from a local corner store by help of the shop owner, today these supermarkets have given a huge option to customers to shop in an extremely convenient manner. This type of culture change has helped Sainsbury’s to grow over a period of time. In order to capture new market and service its customer, Sainsbury’s has expanded rapidly over last few years. Customers today seek complete shopping experience which Sainsbury’s has been able to provide. Sainsbury’s has benefited hugely from both cultural as well as behavioural changes in consumers. People visit supermarkets to buy their daily need merchandise under one roof. With a fast life style, no one wants to waste their time in hopping from one shop to another. This is the reason why business organisation such as Sainsbury’s has seen such a tremendous growth over a period of time.
Like cultural environment, even business environment has major impact on Sainsbury’s. For example economic recession since 2008 has resulted into reduction of customer visiting supermarkets. Which at times lead to situation like retrenchment, shutting down of a store etc. Hence it can be observed that how changes in businessenvironment has both positive as well as negative impact on the business.
Every business starts its operations with a dream/aim to expand internationally. Some companies succeed in establishing their international operations whereas some other fail. This phenomenon has fuelled the concept of globalisation across word. Terms like globalisation, international trade etc. are closely associated with each other. Talking specifically about international trade, then it can be said that today international trade has become back bone for many of the countries. Through international trade countries support their economy and use the funds for further growth and development of the company. This particular task will assess the significance of the global factors and how these factors are responsible for shaping the business activities.
P 4.1 Discuss the significance of international trade to Sainsbury’s PLC UK.
Unlike its other retail competitor Tesco which has operations in more than 12 countries today, Sainsbury’s currently does not have any specific international operation. Which means that entire operation and functioning of Sainsbury’s is based in UK. Despite of this fact, it does not means that Sainsbury’s is completely isolated from international trade and its impact. For example Sainsbury’s today has more than 500 suppliers, out of which many of they located out of UK. Thus any issue at supplier’s end has a major impact on the operations of Sainsbury’s. In fact having a supplier from a different country outside EU or UK at times might prove difficult to handle. Since gradually dependency increases on such suppliers and in case of any situation the overall business is impacted negatively (Johnson, 2013).
P 4.2 Analyse the impact of global factors on Sainsbury’s PLC UK
There are various factors which have major impact on Sainsbury’s business. For example:
Economy Factor: economy of each country today has become dependent on each other. Any slight indication of trouble in one economy, gets reflected immediately on other economies. Due to onset of recession, Sainsbury’s has witnessed a sharp slump in its growth over past few years.
Socio-Political Factors: Both social as well as political factors also play a crucial role in growth of the company. For example under one of the policy made by EU, a member state is not allowed to get involved in trading with a non-member state. Such political or regulatory policies creates unnecessary bottlenecks in the road to development. Also at times due to political unrest in the country there is major impact on the business (Jones & Sufrin, 2014) For example recent London riots resulted in lot of property damages for Sainsbury’s
Technology Factors:Business organisations today are increasing their dependency on the technology available to them. Technology has helped companies like Sainsbury’s to reduce its operational cost. For example Sainsbury’s maintains dedicated records of its customer in a secured location. Also other example is of the supplier-buyer network through which Sainsbury’s connect easily with its suppliers and resolve their issues.
Hence it can been seen that how various global factors have played an important role in the growth of the business of Sainsbury’s.
P 4.3 Evaluate the impact of policies of the European Union on Sainsbury’s PLC UK.
Core purpose behind establishment of European Union was to focus on creating a stable and prosperous society and business environment. EU’s establishment has major impact on the businesses functioning with UK as its base. Common Trade Policy is one such policy which has hampered growth of Sainsbury’s. According to this policy a member state of EU has to take permission in order to conduct trade with other countries which are non-member of the EU. Hence policies like this results into wrong development of the business. Similarly Free Trade policy established by the EU means that within Europe Sainsbury’s today have huge opportunity to expand their business due to this policy. There are several other such policies which have major impact on the business. Important to understand is that, in order to gain maximum benefit out of the policies made by EU, it is important that organisations such as Sainsbury’s prepare their strategy accordingly (Jura, 2012).
Overall it can be concluded safely, that in present business environment there are multiple factors today which are responsible for success or failure of the business. International trade, purpose of organisation, responsibility of organisation towards its stakeholders are some of the factors which has major impact on the performance of the business.