BUSINESS

ENVIRONMENT
A Study on Sainsburys PLC
 Business Environment |1

Table of Contents
Introduction............................................................................................................................. 2

Task 1 Understanding TheOrganisational Purposes OfBusinesses..........................................3

AC 1.1 Purposes of Different Types of Organisation.............................................................3

AC 1.2 How Sainsburys PLC Meets Objectives of Different Stakeholders...........................4

AC 1.3 Responsibilities Of Sainsburys in Meeting the Objectives of The Stakeholders......5

Task 2 Understand the Nature of the National Environment in Which Business Operates....6

AC 2.1 Different Economic Systems Affecting Sainsburys Business..................................6

AC 2.2 Fiscal and Monetary Policy Affecting Sainsburys Business.....................................8

AC 2.3 Competition Policy and Regulatory Mechanisms Affecting Sainsburys Business. . .9

2.3.1 Competition Policy................................................................................................... 9

2.3.2 Regulatory Mechanisms......................................................................................... 10

Task 3 Understand the Behaviour of the Organizations in Market Environment.................10

AC 3.1 Market Structures Determining Pricing and Output Decisions of Sainsburys.......10

AC 3.2 Market Forces Shaping Sainsburys......................................................................11

AC 3.3 Business and Cultural Environments Shaping the Business of Sainsburys..........12

Task 4 Significance of the Global Factors that Shape National Business Activities.............14

AC 4.1 Importance of International Trade to Sainsburys...................................................14

AC 4.2 Global Factors on Sainsburys...............................................................................15

AC 4.3 Polciies of the European Union on Sainsburys.......................................................16

Conclusion............................................................................................................................. 16

Reference.............................................................................................................................. 17
 Business Environment |2

Introduction

Business environment consists of uncontrollable but affecting elements that influences the shape
and nature of business activities. The influence is so unavoidable that the impacts go beyond
businesss capabilities sometimes. Business management of any sort in any market condition,
thinks twice about external environment before commencing for those reasons (Radebaugh, et
al., 2010). Business environment can support the business and again it can bring collapse
whether in local or global markets. This report thus focuses on such vital term of business
environment. In the process of describing the various important aspect of environmental factors,
practical perspectives of Sainsburys PLC is implemented. Sainsburys PLC is an international
superstore and conveniences store chain that operates in over 1200 branches in various countries
especially in UK and EU region. This company started business operations in 1869 in London,
UK and currently owning a 16.25% of market share and 35% of total capital in UK (Sainsburys
PLC, 2012). The application of business perceptions of Sainsburys will ease the discussing
aspects as it aims at providing a clear and concise understanding of organisational purposes of
Sainsburys and other companies. An objective of this report is to present elaboration of concpets
to help understanding the nature of the national and international business environment in
which businesses operate. This writing about business environment then shed light on the
the behavior oforganisations in their market environment. One of the major objectives is to analyze
thoeries on how to be able to assess the global factors that shape international business.
 Business Environment |3

Task
1 Understanding TheOrganisational Purposes
OfBusinesses

AC 1.1 Purposes of Diff erent Types of Organisation

The purposes of business are different for different businesses. There are many factors that shape
and affect the setting of purposes of organizations. Such factors are determined on the basis of
organizational policies, regulations, structure and strategies (Nordhaus, 2009). Whatever the
factors are and how affective they are, there us be some objectives or purposes for any
organization. As the purpose is vital for organizations the types of organization defines the
purposes. The types of organizations include the sole proprietorship, partnership, corporation,
merger and joint ventures. There are several organizations suggested in the module to identify
the purposes. Here are some provided.

a Virgin Group LTD: Virgin Group Ltd is a UK based private limited company started business
operations in 1970 (Buzzle, 2013). The core purpose of this organization is to increase capital
investments by issuing the shares. As it is a private limited company the number of
shareholders is bounded within fifty members. The organization focuses on sustainability in the
market so that its position cannot be rooted easily. The company continuously developing
business activities so that the core purpose of enhancing capitals is achieved without
maintaining all the legal and regulative formalities.

b Sainsbury PLC: Sainsbury public limited company is currently situated in UK and established
by Jack Cohen. This organization began its business as a sole proprietorship business and then
merged as a public limited company (Sainsburys PLC, 2012). The main purpose of the
company is to capture the market share and in order to do so this public limited company
invests a much which are capitalized from business. The growth of the company encourages
capital markets to get attached with the company and thus increasing the capital investment.
c McDonalds: The largest food chain in the world, McDonalds is a franchising organization.
There is no particular list of ownership criteria. The company gives franchise to other
 Business Environment |4

companies and gives permission to use McDonalds name, brand image, marketing and
strategic aids in the business operations (Buzzle, 2013). The purpose of McDonalds putting
emphasize on the franchising business is to minimize business risks of single ownership and
increasing the brand value all over the world. Thus the company can reduce costs and risks of
operating international business worldwide.
d National Health services (NHS) UK: National Health Service is a non-profit organization.
This organization is a public funded which serves the objectives of delivering free health care
services to the public interest (Buzzle, 2013). The organization is operated by government
funding and provides free; strictly prohibited to profit from the service takers.
e Indiana fashion gallery (a shop near residence): The Indiana Fashion Gallery is a sole
proprietorship business which intends to make profits from genuine purchasing and selling
activities. The objective of the proprietor of this organization is to imply the personal skills into
the business activities to earn secured livelihood and increase personal wealth.
The purposes of organizations are shaped and developed on the basis of the types of particular
organization. The above discussion summarizes the strength of the statement effectively.

AC 1.2 How Sainsburys PLC Meets Objectives of

Diff erent Stakeholders

The core purpose of this portion of the report is to describe the meeting of objectives of different
stakeholders from Sainsbury PLCs business perspectives. Stakeholders are combination of
relevant people to an organization. The stakeholders include customers, suppliers, shareholders,
employees directly and indirect stakeholders are leads and prospects, media public, government
and regulatory bodies surrounding the business environment of a business (Scaner, et al., (2009).
The segmentation of stakeholders is quite similar to every type of business. The module asks for
description about to what extent Sainsbury PLC is able to meet the objectives of various
stakeholders. Here are some presented.

Customers
Shareholders or investors
Employees
Government
Suppliers and other trade creditors
 Business Environment |5

The core stakeholder for every company is the customers or the market itself. Customers are the
stakeholders that pay for company products and services. Every other are related to costs while
customers are sources of revenue (Scaner, et al., 2009). So customer objectives are considered
most in the business practices of Sainsbury PLC. Customers objectives are successfully met by
this company in pricing, quality and service procedures. The same is to the stakeholders as well.
Dividends, interests are promised responsibility to shareholders.

AC 1.3 Responsibilities Of Sainsburys in Meeting

the Objectives of The Stakeholders

Organizations of every industry carry some unavoidable responsibilities. The responsibilities are
directed towards various stakeholders like shareholders, employees, society and specially
customers (French and Bell, 2005). However, the responsibilities are not ad hoc or voluntary;
these responsibilities are mandatory for the organizations to carry on.

S
a
b
s'C
in
r
u
y
t
e
c
om
h
ld
E
p

Figure: Sainsburys Stakeholders

Here is discussion presented on such responsibilities of Sainsburys PLC to various stakeholders.

 Business Environment |6

Responsibilities to Customers: The core focus for continuous responsibilities are the
customers. Customers are the only source of many making, thats why or besides that
customers are spotlight of strategic planning for this company (Martins and Terblanche,
2003). The responsibilities it promises and continuously delivers is the best possible
shopping experiences by providing quality products at convenience locations at an
affordable price. To maintain the promised position, Sainsburys develop advanced and
controlled supply chain and trained supporting staffs.
Responsibilities to shareholders: The management of Sainsburys are loyal to look after
the interests of shareholders as it is a PLC. They intend to distribute dividends rates and
continuity as much as possible. In order to fulfil this duty, this organization modifies its
financially operating processes and include e and communicate them into the
organizational objectives
Responsibilities to employees: employees are vital source for completing daily activities
and as they are directly encountered with customers, responsibilities to them are
considered important as well. Such responsibilities are safe and secured, indiscriminate
work place and scopes of personal growth.
Responsibilities to Society: Although the responsibilities towards society are not
regulated duties but Sainsbury does this from ethical perspectives which gives them
competitive advantages as well. This supermarket chain carries ethical, legal,
discretionary and economic responsibilities to the society and people and for completing
the promise Sainsbury PLC arranges a huge budget cuts every year.

Task 2 Understanding the Nature of the

National Environment in Which Business
Operates

AC 2.1 Diff erent Economic Systems Aff ecting

Business of Nestl S.A.

The nature and features of economic systems affect the business directly and businesses cannot
help to shape the business policies according to the different economic system. Nestl S. A. is a
leading multinational business worldwide and as it operates its business in numerous countries,
 Business Environment |7

it has to deal with different economic systems of different countries. Here is short description
provided on the impacts of different economic systems on Nestl S. A. Business.

Free Enterprise: The concept of free economy is exactly the opposite of command economy.
Capitalism is the core principle of this economy. Government has very little control over the
businesses to set up and expand. No central planning is maintained as businesses can the power
to control the market for them. Private properties and easy entrance in the market re the min
feature of this economy. Third world developing countries have free economic system. Nestl S.
A. While doing business in South-East Asia, Africa has to deal with these economy policies.

Mixed Economy: In mixed economy governments control over the economy as well as the
participation of businesses re noticed. Businesses in this economic system have to deal with the
government restrictions while freely doing businesses. Most large economies of the world re
following this economic system like USA, Canada, Japan and other countries.

AC 2.2 Fiscal and Monetary Policy Aff ecting Business

of Nestl S.A.

No wonder the economic system is the most crucial affecting element for any business in any
environment. The most vital element of the economic system is the fiscal and monetary policy
practiced. It determines how the business organisation can employ its resources in the business.
Nestl in operating business has to deal with various fiscal and monetary policies. Here is a
short description on the impacts of these policies on Nestl S.A. provided on the basis of UK
economy.

Nestls economic goals are different for different economies. In UK where a balanced practice
of mixed economy is noticed, Nestls economic goal is to compete in the market with shared
dominance. Nestl cannot own the market no matter how much resources it possesses as
government has allowed other businesses to sustain in the UK Market. The fiscal policies are
influential because governments income and expenditure are directly related to the business
activities of Nestl S.A. when regulatory bodies require more finance from the market or the
finance in the market increases the tax rates increase. The concurrent position of market demand
and supply are included in the consideration of fiscal and monetary policies. One of the most
influencing monetary policies is the Public Sector Net Borrowing (PSNB) and Public Sector net
 Business Environment |8

Cash Requirement (PSNCR). The bank rates, taxation and aggregated demands are also play an
affecting role in the business of Nestl S.A.

AC 2.3 Competition Policy and Regulatory

Mechanisms Aff ecting Sainsburys Business

Alike economic systems and fiscal and monetary policies, the competition policy is also
influential in the business practices for Nestl S.A., so is the regulatory mechanism. It defines
how the business dealings are related and conducted with the economic system and the
government bodies. However, the impact of the competition policy and regulatory mechanism
are described in the following.

Impacts of Competition Policy: UK economy supports the free entrance of businesses but in a
planned manner. Thats why there are ample competition in the market for Nestl S.A. Now
where there are competitions there must be some regulatory bodies that can look over the
competition and control it. UK government has introduced several laws in order to controlling
the overrated competition and get the best of out of the competition for the economy. Some of
such laws are: Competition Act, 1998, Enterprise Act, 2002 etc. These laws summarises the
degree of intense competition, follow up and market controlling methods. There are some bodies
to implement and monitor the competition policies like Competition Commission, office of Fair
Trading, Directorate General for Competition, European Commission etc. Rules and regulations
held by these bodies directly impacts on Nestls business practices because avoidance of such
policies may cost huge damage for this company in UK market.

Impacts of Regulatory Mechanism: Depending on the nature of mechanism the regulatory

mechanism has both affirmative and negative impacts on Nestls business in UK. The regulatory
mechanism describes how the regulations are implemented on the businesses and how
businesses can maintain the regulations. For example, if any country of EU imposes a quality
standard for a particular food product that are not served before, then maintaining imposed
quality may result in increased production cost which must be handled by the government.
Government in such situations informs the market about the improved quality as well as the
price hike. Thus the regulatory mechanism impacts on Nestls business.
 Business Environment |9

Task 3Understanding the Behaviour of the

Organizations in Market Environment

AC 3.1 Market Structures Determining Pricing and

Output Decisions of Sainsburys

Market structures alike the economic systems are affecting to the business activities and planning
processes. There are several market structures such as monopoly, oligopoly and competitive
markets. Terms relating to the market structure affect the pricing, service level and every other
business decisions (Kotler and Keller, 2010). Internationally operated businesses like Sainsburys
must study the different market structure related issues because different countries have evolved
with different market structures. For different structure, a company operating in various countries
need to formulate different approaches and strategies to compete in the market for longer
periods.

Monopoly market structure: Monopoly market is where there are hardly any
competitors in the market. Companies here in this structure capture the whole market
because there are no other alternatives to customers. Company sets prices considering
more about businesss interest rather than customers affordability (Burnes, 2009).
Usually innovative businesses create the monopolistic conditions.
Oligopoly market structure: Oligopoly market structure differs from monopoly market
in the number of competitors and customers. In the monopoly market the numbers of
customers are many where the provider is limited but in the oligopoly market the
competitors outnumber the customers. This happens usually in B2B (business to
business) industry (Burnes, 2009). Competitors in this structure charges low price and
high quality as much as possible to survive in the market. Intermediaries of Sainsburys
faced this sort of competition in few countries.
Perfect competition market: Sainsburys is encountered with perfect competition in
most of the markets it operates. It refers to the market structure where the proportion of
competitors and customers are balanced (Burnes, 2009). Organizations seek for
competitive advantages to lead the position. Price and qualities are set on the basis of
 B u s i n e s s E n v i r o n m e n t | 10

customers demographics. Sainsburys perfect competitors are Tesco PLC, Morrisons,

Asda and Walmart. To gain and maintain competitive advantage, besides price, quality
and service, the companies focus on CSR (corporate social responsibility) and customer
based relationships.

AC 3.2 Market Forces Shaping Sainsburys

In this section of the report how the market environment affects the business activities of
Sainsburys are discussed. The discussion above now proceeds to focusing on the market forces.
Market forces in every economic system, every market structure and every policy have direct
influence on the business shape, natures and activities (Allen, 2001). Such market forces are
supply and demand, elasticity of demand and supply, perceptions and actions of customers,
economic of scale, and cost and output decisions. Here is discussion presented with examples of
how these forces affect the shape of Sainsburys UK.

Supply and demand: If Sainsburys focuses on increasing the supply without analysing
the market demands, surplus will create and being a convenient shop of daily products, it
will cost heavily. The increase in demand can put Sainsburys at perplex if the supply is
not enough. The core point is Sainsbury cannot control the level of supply and demand.
Thus, this market force can be so affecting the business greatly.
Customers perception and actions: Another uncontrollable but hugely affecting market
force is the customers perception and actions. For example, this company offers a deal to
the customers of Poland that is hugely accepted in London but may rejected in Polish
culture. Thats why, the study of consumer behaviour are important in international
business as the cultural differences as well the demographic variances shape the
consumer perception and actions in accordance.
Economic of Scale: Economies of scale is a competitive advantage to the company
because this concept of mass production creates the production costs allocated on each
produced unit. The more unit is produced, the less the cost is. This is an internal force of
Sainsburys to achieve. Sainsburys enjoys this facility as it is assured of large consumer
groups to sell.

There are other forces as well that affect Sainsburys business practice such as cost and output,
competitive policies and PESTLE factors.
 B u s i n e s s E n v i r o n m e n t | 11

AC 3.3 Business and Cultural Environments Shaping

the Business of Sainsburys

In maintain a consequent discussion of influencing business environmental forces surrounding

Sainsburys PLC; the next one come into action is the business and cultural environments. The
strategic planning of Sainsburys are incorporated with such environmental considerations.
However, the forces can be addressed as PESTLE factors.

Political

Environmen
Economic
t
t

Sainsbur
y's PLC

Social And
Social And
Ethical
Cultural

Technologic
Technologic
al
al

Figure: Sainsbury's External Business Environment (PESTLE)

Political forces: Current government, political stability, election, public opinion,

international relationship are considerable for political environment analysis(Gitman and
McDaniel, 2009). Sainsbury's must conduct a thorough research on the political forces
while operating and entering in foreign market segments although the UK market
possesses greater opportunities than threats for Sainsbury's.
Economic forces: The impacts of economic system and market structures are described
previously in the report which comes fromexternal business environment. However,
Sainsbury's must consider the rate of exchange, financial regulation, financial institutions
and other relevant issues while conducting economic environmental screening.
 B u s i n e s s E n v i r o n m e n t | 12

Social and cultural forces: Sainsbury's and no other companies cannot avoid social and
cultural forces from environment analysis. The shape and nature of a business wholly
depends on these issues whether in local or global market. According to Gitman and
McDaniel (2009) Language, aesthetics, symbols as well as lifestyle, religion, cultural
differences and so many other demographic forces can destroy business if not properly
considered.
Technological forces: Technological development, acceptance of technology, resistance
to change or availability of technology as well the application of modern information and
communication technology in the business are considerable factors in the technological
environment (Radebaugh et al., 2010). As the technology is rapidly changing the
consumer trends Sainsbury's focuses on continuous innovation to cope up with the
change.
Legal and Ethical forces: There are so many examples of businesses going in vain for
not considering the legal and especially ethical factors. CSR, Green marketing and
recycling and reusing are such concepts adopted by Sainsbury's to prevent from ethical
issues.
Natural environmental forces: The supermarket and convenience store industry
supposed to be out of league for affecting natural environment but Sainsbury's PLC
continuously improvising business activities to avoid harmful elements and promote
awareness to the environment through various programs.

Task 4Significance of the Global Factors that

Shape National Business Activities

AC 4.1 Importance of International Trade

toSainsburys

International business is a common term for every large business organizations and they intend
to go global with their business. The rapid boom of globalization, development in the
information and communication technology, economic transitions are responsible for
organizations operating in international market (Nordhaus, 2009). Moreover, governments of
countries are opening scopes for foreign investors to come and so does the free trade
 B u s i n e s s E n v i r o n m e n t | 13

organizations in various regions. However, international business in significant to Sainsbury's; as

a result Sainsbury's is operating its business over 1200 supermarket and convenience stores and
rapidly capturing potential markets all over the world.

Sainsbury's is already a global brand especially in European Union countries. The reason for
being more active in the EU region is because of the free trade operations without complex
boundaries. The company emphasizes a lot on the spreading of international trade because of
several outstanding facilities; such as:

Outsourced business in low costs: Sainsbury's can import businesses from other
countries where labor or material costs are lower than the home country and that of
without no significant change in quality (Daniels, Radebaugh, Sullivan, 2007). The
flexible trade regulations in such trade areas gives this company alike many others to
outsource from other suitable countries.
Increasing capital investments: The more Sainsbury's will spread its business globally
the more it will earn capital ownership. No wonder, over 1200 branches of a single brand
is possible without vast investments. Not only the capital investment, shareholders are
getting benefited which is easily noticeable from stock market performances.
Enhancing global brand value: The scope of international trading allows Sainsbury's to
create and enhance a global brand value all over the world and achieving a competitive
advantage in the existing market over leading competitors.

There are other importance aspects as well in the international trading such as advantages of
economies of scale and capturing new markets with potentials for Sainsburys PLC.

AC 4.2 Global Factors on Sainsburys

Previously in the report, the impacts of market factors of existing business environment were
discussed. The discussion showed how important the market factors are and if the local factors
are such vital the how vital the global factors can be for the international business (Daniels,
Radebaugh, Sullivan, 2007). The differences between home and host countries and the
international events influence business unavoidably. Here are some global factors that affects the
international business activities of Sainsburys.
 B u s i n e s s E n v i r o n m e n t | 14

International competitiveness is such factor which can change the business events
completely.
Another affecting factor is the international business environment that consists of
international economy, politics, technological and other aspects.
The change in current rate of tax and tariffs in the host country, changes the operations of
strategically planned business entirely and make the organization planning again.
The same effects on the global business of Sainsburys are carried by the change in
exchange rates which is vital to create a economic balance between home and host
country as per the planned budget.

AC 4.3 Policies of the European Union on Sainsburys

EU introduces and regulates various policies for free trade in the European countries in order to
aid the global businesses but the policies and regulations are affecting hugely (Buzzle, 2013). EU
imposes these policies on the member countries; if Sainsburys is to operate in member country
in EU, must follow and abide the rules. Here are some listed:

Employment policy including host country employment issues

Regional policy including mandatorily considering regional PESTLE factors
Inflation policy including changes in economy issues
Education and training policy including human resource planning and
development issues
Taxation policy including tax, rebates, duties and tariff issues

These are the most commonly practiced regulations in the EU zone that can hugely affect the
business operations of Sainsburys.

Conclusion

The report aims at providing a concise discussion about business environment of Sainsburys. It
focuses on various significant perspectives and aspects of business environment that are hugely
affecting to the operations both in local and global markets. The factors described in the report
are necessary for conducting businesses to operate and also necessary for the learners of this
subject. It is hoped that the report meets all the objectives that are asked in the module provided.
 B u s i n e s s E n v i r o n m e n t | 15

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