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Diploma in Business
Unit Number and Title
Unit 1 Business Environment
Sainsbury has been chosen to understand how a firm in UK operates and how is affected other factors. The main objectives of a firm and how does it tries to meet those factors is also important. Firm employs different strategies to meet different stakeholder’s objectives. All the stakeholders have different objectives and these objectives have been analysed. Firm operations and business strategy is also affected by the global factors, market structure, European policies, fiscal and the monetary policies. All these aspects have been analysed and how this affect Sainsbury does has also been analysed.
The organization which has been chosen for this task is Sainsbury. This firm is in the industry of retail and has different retail outlets
The chosen company is Sainsbury LLC.It operates supermarkets chain across UK. Currently it is the third largest supermarket store in terms of market share in UK. Sainsbury is a public listed firm and it main aim is to serve the customers and maximize the shareholder’s wealth. There are three divisions through which Sainsbury operates its stores. First is the Sainsbury Supermarkets, second is the Sainsbury Convenience Stores and lastly the Sainsbury Bank. Its main purpose is to serve the customers. Their main mission is to become one the trusted retailers where people would love to work and also shop.
Their goal is to make the lives of customer happy in their everyday lives, by giving them better services and quality products at reasonable prices. Their promise is that people live well for less (Sainsbury, 2012).
Their corporate values is to provide best food which is healthy, their source supplies with integrity, respect for environment, making a positive difference in the community and also provide a great place for work.
Sainsbury is a well know brand in UK and is one of the most trusted retailers. There are various stakeholders associated with the firm. One of the major stakeholders are the customers. Since they are in the retail business customers form the major stakeholders. If they are not happy with the service of the firm or their products or their prices then it will be difficult for the firm to continue their business and increase their sales as there is lot of competition in this area.
Sainsbury continue to the top 3 retailers of UK and have a strong presence in UK. They believe in providing customer service and the customers are also happy with the services of Sainsbury. Customers form important stakeholder and thus the firm is able to meet the objective of customers of providing a better shopping experience and also giving them good quality products at a fair price (Buchanan, 2014).
Firm has a good credit history and hence the creditors who are also stakeholders in the firm business also are happy. Firm is able to meet the objectives of the firm.
The next important stakeholders are the investors of the firm. Firm has been able to increase its revenues and seen a strong growth year on year. Firm’s financial ratios have been impressive and firms financials have been good. Firm return on equity is more than 10% and thus the investors are getting good return for their investment. Thus the firm has been able to meet the objectives of its stakeholders of the firm (Dunning, 2013).
Firm major responsibility is to provide better customer experience and give good quality products. Firm needs to ensure that the customers receive the best products and at a fair price. The firm should provide best products and not compromise on the quality of the product. It is the responsibility to do a check on the product before they sell the products to the customers. Also they should not overcharge the customers. Firm needs to also provide better customer service post sales. If any product is bad then they should either replace it or refund the money. Also the firm needs to increase sales and perform for their investors. Firm has latest technology to meet the customer expectations and also provide training for the staff to treat the customers well (Sainsbury, 2012).
There are different types of markets and depending upon the markets and economic systems formed they try to allocate the resources to the different institutions in that economic system. First type of market is the traditional market where the business is done mostly done through the beliefs of the individuals. Traditional customs and beliefs play an important role in the market. It may not be efficient market. The other market is free market. Here the market is driven by demand and supply. Resources are allocated efficiently on the basis of demand in the market and the supply available in the market. Sainsbury operates in UK which is a free market. Customers choose the firm based on their convenience and their needs. Also in UK there is a tough competition in the retail industry. As a result the firm needs to keep competitive prices in the market. There are many firms which have the retail outlets and hence if the firm is not competitive enough then the customers will turn to other retailer. Also the retailer needs to understand the demand of the people. They need to stock the proper goods which are in demand. Normally as the demand for the product increases the price of the product increases and hence the supplier keeps more of the product in demand. As a result there is more investment in that product. If more competitors starts to manufacture that product unless there is a patent with the product there will be oversupply and as a result the price of the product will drop. This happens with Sainsbury. If there is oversupply of the products then the prices will drop and if there is shortage of the product and there is high demand then the price will rise. However as it’s a free market other firms start getting into the producing the product and hence the resources will be allocated to that and there will be stabilization of prices.
Sainsbury is in the retail business and hence its sales are largely dependent on the economy of UK. Economy of UK plays an important for large sales of the firm. Fiscal and monetary policy can play a important role and have a huge impact on the economy of UK.
Monetary policy for countries is decided by the central bank. In the case of Sainsbury it will be the ECB- European Central Bank. The main function of the central bank is to decide base interest rate of economy at which the banks can lend to the central bank or at which they will receive the loans from central banks. On this basis on the bank will decide at which rate it will lend in the economy to the people and other firms. The main aim of the central banks is to stir the economy using lower interest rates or decrease the inflation rate by increasing the interest rates.
If the central bank decreases the interest rates then the banks will lend at a lower interest rates in the economy as a result a result people and firm will borrow more and hence there will be more economic activity. As a result the employment will increase and hence the disposable income in the hand of the people will increase. As a result there will be more spending and thus the sales of the retail firm are bound to increase Thus it will be beneficial for the firm. If the central bank decreases the interest rates then the economic will slow down as there will be less lending in the economy and hence there will be less employment and less increase in the salaries. Also as a result the disposable income will decrease. Thus the firm will face a slowdown in the sales. Thus the monetary policy will play an important role in the economy which will affect the sales of the firm.
In terms of the fiscal it is less effective than the monetary policy and its direct effect is not fixed. Fiscal policy is decided by the government of UK. They decide on the tax rates and the government spending. If the government increases the tax rates to higher level then there will less disposable income in the hands of the people and also the people will be less motivated to work as they are paying huge taxes. Also if the tax rate is low then the government will have fewer revenues. Hence there should be optimal amount of tax rate in the system. Government spending increases the economic activity and hence there will be more employment if the government invests in the economy. This will also lead to better sales for the firm.
Thus for Sainsbury monetary and the fiscal policy play an important role.
UK government has formed strong completion laws to prevent the organization from taking advantage of their market share and position. It can be often seen that some of the firms become too big so that they can affect the prices in the market and their try to take advantage of the people.
There is a Competition Act and also Enterprise Act of 2002 which act as tough regulations for the competition policy (Bayoumi, Laxton, &Pesenti, 2004).
There is a Competition and Market Association which keeps a tab on the activities of firms and tries to analyse whether the firm is not taking undue advantage of the firms. There is also EU commission which tries to monitor monopolies, cartels, merger and acquisition and appeals of the consumers. It has lot of powers and has taken actions against my big firm like Microsoft when they try to take advantage of their positions.
There are different market structures which exist in the economy. First is the monopoly. Here is only one entity in the market which sells the product and hence there is a dominance of the firm in terms of price. The firm has the power to decide on the price of the product. Here if the product is in demand then the price can be kept high. Thus the monopoly is not good for the economy as there is inefficiency in the market and the firmcan ask for higher price and as a result the consumers will suffer. Thus the monopoly is bad for the economy. It mainly exists when there is a patent for the firm or if the government has given power to distribute the products to only certain people then there can be monopoly.
Then there is other type of market known as duopoly. In this there are only two producers of the product. Hence there is little bit competition. But the firmstill gets to decide on the price and they have powerto decide on the price. Also the product can have a scope of improvement.
The other market is the competitive environment. Here the market has enough buyers and sellers in the market. Hence the price is set up by the demand and supply. This is the optimal market structure. The price is appropriately determined by the market.
Market forces determine the way business operates in UK. In UK there is free economy and hence market forces play an important role. Demand and supply play a major force in the way business operates. Sainsbury is driven by demand of the product. If there is more demand of a product or a brand then the Sainsbury will keep more of the product and there will be increase in supply. Initially the price of the product can be high however if there is more supply then the price of the product decreases due to oversupply. Other factor which can decide on the way business operates is GDP, inflation or unemployment. GDP growth rate is one of the important factors affecting the Sainsbury operation. If the economy is doing well and GDP is growing then the firm will keep more stock of the inventory as it can expect good sales.
If the inflation is high then the sales of the firm will be low as people will buy less due to the high costs. Also when the employment is low then there will less sales for the firm as the people will have less income to spend.
Other market force which can affect the firm is the technology. With the introduction of new technology there can be change in the dynamics of the markets. Firms need to be updated on the technologies existing in their area. For Sainsbury one of the important things is to maintain the inventory of the products. Hence if any product is getting depleted the firm need to be aware of it. Hence inventory management is an important factor for the firm. Thus if there is a new technology which can manage the inventory in a better manner can be used to the advantage to the other retail firms. Thus Sainsbury can be affected by the technology being used and is one of the important market factors which can affect the decisions of the consumers.
Culture plays an important role to shape the organization. Sainsbury focus is on the customer behaviour. For a firm like Sainsbury they have to deal with customer’s real time and hence need to be prompt and courteous to the consumers. Thus the culture of the firm plays an important role in this aspect. Business management should realize that culture is percolated from the top and hence they need to tell the store operators about this aspect that they should treat their customers with respect. This can help the firm increase their customer base.
The main goal of the firm is to give customers the best products at a fair price. With this goal in mind the culture of the organization is also moulded into fulfilling that objective. Also the behaviour of the employees needs to reflect this and their actions need to speak about this objective. They should put the customer at the centre and actions should try to benefit the customers.
One of the important things is to be honest with the customers and not cheat them by providing low quality products. As the firm also gives grocery products, thereby the firm need to ensure the quality of the product as it is a trusted brand in the country.
Another thing which is important is serving the customers better. Firm needs to decide on how it can serve the customer better. Firm needs to come up with new ideas to serve the customers. If this is the culture of the organization then the firm will come up with ways to help the customer better. Thus if it’s ingrained in the culture then the firm will succeed to help the customers. Another important aspect is the bribery. Firm should not engage in any activities which can destroy the brand of the firm. Mainly the firm need to establish the culture that they will be honest and have integrity in their work. This will help the firm treat the employees with respect and also have integrity in their work.
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International trade forms an important aspect for the UK government and their business strategy. London in UK is one of the financial centres of the world. Also a lot of tourists come to UK and thus the economy gets a lot of revenue from the tourism industry. Thus the economy derives a lot of trade from the international trade. In addition to this a lot of students come to UK for their studies. Thus a lot people visit UK and thus there are high chances of increase in sales of the firm. Plus firm can increase their product line with the products from outside UK. Firm can get new products and better products due to the international trade.
Also firms set up new stores in other nations. This can help the firm to increase the sales. With new people coming UK they will also buy grocery and thus this can also lead to increase in sales of the firm.
Global factors play an important role in driving the business of the firm. Global economic has a major impact on Sainsbury business. For e,g, during the financial crisis of 2008 and post that there was decline in sales of the firm. Also during the Euro crash the firms’ revenues decreased. The global factor played an important role for the revenues of the firm. If the global factors are positive then the firm will see a increase in revenues. Since London is the financial hub it will affect UK in terms of revenue if the global economy is doing well. Also if the economy is doing then people will visit more and thus there are chances that the sales of the firm will increase (Sila, 2013).
Since in UK there are people from across the globe who work in London and UK it makes sense to have products related to those people or which they prefer. With the increase in international trade, Sainsbury can get the products and thus increase its sales with the increase in the portfolio.
European policies play an important role in the economy of UK and thereby the sales of the firm.ECB decide interest rates at which the banks will lend to the central bank. This as explained in the above task will affect the economy and thus the sales of the firm will change according to the economic conditions of the country. Also many individuals living in Europe visit London, this affects the revenues of the firm. Also since UK is also part of European nations, European policies of businesses, competition policies, and business friendly environment also helps the firm to have more sales. European policies have a deep impact on the firm business. The Euro crash and the policies which were made to solve the Euro crash 2010 had a deep impact on UK and its economy and thus affected Sainsbury business. Visa rules applied by Europe also plays an important role for the firm. If there are relaxed Visa norms then more people will visit the country and there are more chances for sale of the products of the firm.
Here we have looked at different aspects which affect the firm Sainsbury in UK. It can be seen that the success of the firm depends on many factors and there are many stakeholders of the firm which get affected by the firm performance. There are stakeholders which get affected by the firm operations. Customers are mostly affected by the way firm operated and investors are affected by the performance of the firm. Also firm performance is also dependant on the market structure of the economy. If the market is competitive then the margins will be low for the firm and the growth will be stable. However if the there is less supply and high demand for any product then the firm can get high margins for that product and thus can be more profitable. Cultural and behavioural factors play an important role in which the firm is shaped and treats its customers. The firm’s brand is built on the basis of these factors. Fiscal and the monetary policies of the government and the central banks respectively play a major role in driving the revenues of the firm. If these policies are supportive then the firm business can see low growth. Global factors play an important role and positive global factors can drive up the sales for the firm. Lastly the international trade and European policies can also affect the business of the firm.
Sainsbury, 2012.Annual Report.[pdf] Available at http://www.j-sainsbury.co.uk/media/649393/j_sainsbury_ara_2012.pdf[Accessed on 13th October 2014]
Balassa, B., 2014. Resolving policy conflicts for rapid growth in the world economy. PSL Quarterly Review, 31(126).
Dunning, J. H., 2013. Kingdom economy. Structural Change in the World Economy (Routledge Revivals), 167.
Bayoumi, T., Laxton, D., &Pesenti, P. (2004). Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assesment (No. w10416). National Bureau of Economic Research.
Sila, I. (2013). Factors affecting the adoption of B2B e-commerce technologies.Electronic commerce research, 13(2), 199-236.
Buchanan, M. A. (2014). CSR and the Social Contract: New Lenses for Stakeholder Analysis and Strategic Management.