Business Environment

Table of Contents
Introduction................................................................................................................ 4
Background................................................................................................................ 4
Task 1......................................................................................................................... 5
1.1 organizations with their purposes.....................................................................5
Virgin Group Ltd................................................................................................... 5
Sainsbury PLC...................................................................................................... 5
McDonalds............................................................................................................ 6
National Health Services (NHS) England..............................................................6
A corner shop....................................................................................................... 7
1.2 Sainsbury PLC meets the objectives of different stakeholders..........................7
1.3 Responsibilities of Sainsbury PLC and strategies employed to meet the
responsibilities........................................................................................................ 8
Task 2......................................................................................................................... 8
2.1 economic systems and allocation of resources effectively by Sainsbury PLC....8
The Free Market Economy.................................................................................... 9
Transitional Economy........................................................................................... 9
Command Economy............................................................................................. 9
The Mixed Economy............................................................................................. 9
2.2 Impact of fiscal and monetary policy on Sainsbury PLC....................................9
2.3 Impact of competition policy and other regulatory mechanisms on the
activities of Sainsbury PLC.................................................................................... 10
Task 3....................................................................................................................... 11
3.1 Market structures and determination of pricing and output decisions of
Sainsbury PLC........................................................................................................ 11
3.2 Market forces shape Sainsbury PLC U.K..........................................................12
Demand and Supply........................................................................................... 12
Elasticity of Demand and Elasticity of Supply....................................................12
Economies of Scale............................................................................................ 12
Customers expectations....................................................................................13
Short run and Long run concept.........................................................................13
Technology with employee skills........................................................................13
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3.3 cultural environments shape the behavior of Sainsbury PLC..........................13

Task 4....................................................................................................................... 14
4.1 significance of international trade to Sainsbury PLC.......................................14
4.2 Impact of global factors Sainsbury PLC...........................................................14
4.3 Impact of policies of the European Union on Sainsbury PLC............................15
Conclusion................................................................................................................ 16
Bibliography............................................................................................................. 17

Introduction
Business Environment is an integral part of effective and efficient management of Business.
Business Environment determines the types of Business that will be Successful within the
environment. Business Environment has many forces that shape the business segment as well as
product line. In this particular assignment, the Business environment of Sainsbury PLC is
analyzed with respect to some of the factors such as Market structure, key responsibilities of the
Sainsbury PLC etc. The impact of Fiscal and Monetary Policy on the Business of Sainsbury PLC
has given importance here along with the impact of cultural Environment. Moreover, the
importance of International Trade as well as the impact of Global factors on Sainsbury PLC is
described with the essence of globalization. Lastly, the policy of European Union and its relation
to the Sainsbury PLC is presented with reference to the particular policies.

Background
Sainsbury has started its journey in 1869 with John James Sainsbury and his wife in London.
Though it started as small retail store, now it becomes the third largest U.K. retail chains.
Sainsbury is operating more than 1200 supermarkets of the world along with the 165000
employees. Sainsbury is now a listed company in U.K. that is serving a wide range of customers
every day. Sainsburys focus is on the customers satisfaction. Sainsbury tries to give the best
possible shopping experience to its customers. Sainsbury has its focus on creating loyal
customers over the years, through serving the customers rightly, at the right time.(J Sainsbury
Plc)
The Vision of Sainsbury PLC has some unique features that are as follows:

Sainsbury is serving best food for health

Sainsburys integrity is to serve the quality products

Sainsbury has responsibility and respect for the environment

Sainsbury is creating a positive difference

Sainsbury is creating employment opportunities

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The main purpose of Sainsbury is growth, in terms of market share as well as

number of customers. Above five areas are facilitating the purpose of the
Sainsbury. (Sainsbury Plc)

Task 1
1.1 organizations with their purposes
There are different types of organizations available. Some of the organizations are profit seeking
and some others are beneficiary or non-profit organizations. Organizations vary due to their
structures, cultures, and environment along with the line of Business. (Griffin, 2011)
Virgin Group Ltd

Virgin Group is known as one of the leading investment group along with the global identity and
appealing brand Image. Sir Richard Branson was the founder of Virgin Group. Virgin group has
many product and service line that include mobile telephony, travel, leisure, Music, Holidays,
financial Services and health. Virgin group is operating in over fifty countries along with more
than 50000 employees.
The purpose of virgin group is to serve the society through its quality products and services
along with the profit seeking motive. From 1970 to present times, virgin Group has attained
success to serve their existence purpose. Serving as a brand is one of the most important
purposes of Virgin Group.(Virgin)
Sainsbury PLC

Sainsbury has started its journey in 1869 with John James Sainsbury and his wife in London.
Though it started as small retail store, now it becomes the third largest U.K. retail chains.
Sainsbury is operating more than 1200 supermarkets of the world along with the 165000
employees. Sainsbury is now a listed company in U.K. that is serving a wide range of customers
every day. Sainsburys focus is on the customers satisfaction. Sainsbury tries to give the best
possible shopping experience to its customers.
The purposes of Sainsbury PLC have some unique features which are as follows:
5

Sainsbury is serving best food for health

Sainsburys integrity is to serve the quality products

Sainsbury has responsibility and respect for the environment

Sainsbury is creating a positive difference

Sainsbury is creating employment opportunities

The main purpose of Sainsbury is growth, in terms of market share as well as

number of customers. Above five areas are facilitating the purpose of the
Sainsbury. (Sainsbury Plc)
McDonalds

McDonalds Corporation is an American company, where it has its global identity. McDonalds is
regarded as the worlds largest chain of fast food restaurants, which is highly recognized for
hamburgers. McDonalds is operating in more than 119 countries through its 35000 outlets all
over the world. McDonalds started its journey in 1954 that was established by Ray Kroc.
McDonalds is serving approximately 70 million people daily.
The purpose of McDonalds is doing the right thing with the good in it. Whatever McDonalds
makes, its efforts are for making that good for the customers.

Good things are always

appreciated and along with this, good service and food paves the way of future. Thus McDonalds
serves its purpose through the tag line whats good for us, is good for us all. (Mcdonalds)
National Health Services (NHS) England

National Health Services England is treated as the worlds largest health service that is publicly
funded. With its evolution in 1948, it has been able to create the image of most efficient and most
comprehensive Health service in the World. The NHS has come with the idea that good
healthcare should be available to all, irrespective of wealth, class, age and other issues.
The purpose of NHS is to serve the nation for the betterment of the people. No profit motive is
there; rather the right of getting equal treatment and medical benefits are the main purpose for its
existence. Patients are treated as the most expensive resource for NHS. Patients are highly
satisfied with the services of the NHS. ( The NHS in England)

A corner shop

Bellymose is a corner shop near Yorkshire, where different types of fast foods are available. Here
the local people come often and taste the foods. The business has sole profit motive through
serving the nearby people. Its having no global image or Brand appealing.
Thus the purpose of the Bellymose shop is to serve the customers with its foods, and earn
revenue by selling of the foods. The quality issue is not rigid here. As a street shop, is has too
many customers to serve every day.

1.2 Sainsbury PLC meets the objectives of different

stakeholders
Individuals or groups who have stake in the activities of Sainsburys are regarded as the
Stakeholders. Stakeholders have several rights in the Sainsbury, where both the sustainability
and performance related information is available for the stakeholders.
The stakeholders of Sainsbury PLC include the followings:

Suppliers
Customers
Investors
Employees
Government along with the Public

Each and every type of stakeholders is important for the sustainable growth and future of
Sainsbury PLC. Stakeholders make the decisions of investment or employment or mere buying
products of Sainsbury PLC through the information related to its performance and financial
position.
As a Public Limited company Sainsbury PLC has to publish annual reports where all the
information related to companys performance as well as financial position is presented.
Investors and employees find the information about the growth of Sainsbury PLC in order to
make decision of involvement with Sainsbury.
Sainsbury PLC has arranged a continuous program in order to meet the stakeholders need
through public and private discussions. By these discussions, feedbacks of the stakeholders are
prioritized to the goal attainment of the company. Sainsbury PLC accumulates the needs of the
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stakeholders and then delivers the values and information according to that needs. Moreover,
Sainsbury PLC tries to inspire the stakeholders by innovation and integration. (J Sainsbury Plc)

1.3 Responsibilities of Sainsbury PLC and strategies employed

to meet the responsibilities
The role of Retailers like Sainsbury PLC is facing dynamic change over the years. These changes
are related to customers expectations and the demands from the suppliers and local
communities. To meet the challenges and fulfill the expectations from different groups of
stakeholders, Sainsbury is making 20x20 commitments that will be helpful in meeting the
responsibilities of Sainsbury PLC.
In order to hold the position of being the worlds largest Fair-trade Retailer, Sainsbury PLC has
identified its core values and responsibilities in 20x20 commitments. Moreover, Skilled Human
Resources are needed to fulfill these commitments of Sainsbury PLC while Sainsbury is growing
over the Years. Sainsbury has responsibility toward the environment, which is maintained
through the lower emission of carbon along with the quality foods providing toward the society.
(J Sainsbury Plc)

Task 2
2.1 economic systems and allocation of resources effectively
by Sainsbury PLC

To solve the economic problems and to assure the appropriate resource Allocation, an economic
system is needed. The balancing of Economy is always a challenge due to the nature of demand.
Demand is always high, where resources are limited. Thus its difficult to ensure the proper
allocation of resources to the people.
Different economic systems are introduced in order to allocate resources, which are described
below:

The Free Market Economy

The free Market Economy is regarded as the most acceptable economy, where the market values
of goods and services are determined through the intersection of Supply and demand curve.
Government intervention is avoided here, where it is assured that without government
legislations, the economy can be fair to all.
Transitional Economy

A transitional Economy is that type of Economy, which is undergoing a set of structural

transition in order to develop the market based organizations. Macroeconomic stabilization
through institutional reforms and restructuring along with privatization are the main components
of Transitional Economy.
Command Economy

Command economy is where the Government is the determining or deciding factor. The
government decides the supply of the products and services along with the pricing. The
Government solely takes production or Marketing decision.
The Mixed Economy

The Mixed Economy is the economy where both the Government and the Market are the
decision makers for the proper allocation of resources. Mixed Economy is the combination of
free market economy and Command Economy. (Asamoah & Chovancov, 2011)
From these five types of economy, Sainsbury is going through the Free Market economy in order
to allocate its products to the Customers. Pricing is crucial here in order to determine the items to
produce and the quantity to produce. Sainsburys Pricing of Products is determined through the
demand of customers with intersection of the Suppliers choice. Thus the Equilibrium pricing is
determined where both the customers and suppliers are satisfied with the products of Sainsbury.
Profit seeking motive is influencing the Price Mechanism of Sainsbury in order to allocate the
resources properly. (J Sainsbury Plc)

2.2 Impact of fiscal and monetary policy on Sainsbury PLC

Fiscal policy means the system where the development of economy is dependent on the
collection of tax. The most affecting issues in Fiscal policy can be

Increase of Value Added Tax (VAT)

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Increase of income Tax (Asamoah & Chovancov, 2011)

In above issues, Sainsbury is affected through the Fiscal policy severely. If the VAT is increased
on the products, then Sainsbury PLC has to make new pricing strategy in order to make the
predestined profit. On the other hand, if the income tax increases, then people will try to spend
less money, as they have to pay higher amount of taxes with comparison to previous times. They
will try to limit their budget with the daily necessaries, and cut off the luxury items. As
Sainsbury PLC is mainly a retailer for food and grocery items, the rise of income tax in Fiscal
policy has less impact on Sainsbury PLC. (Huczynski & Buchanan, 2000)
Monetary Policy is the policy where supply and demand determines the proportional distribution
of Money. Through lowering the interest rates, the supply of Money in the Market is risen, in
order to ensure the sufficiency of Money in the Market. If people have sufficient money, they
will buy more and more but save less. As the interest rate is low, people will reluctant to save,
and thus the business of Sainsbury PLC will be much better and higher profit will be earned. (J
Sainsbury Plc)

2.3 Impact of competition policy and other regulatory

mechanisms on the activities of Sainsbury PLC
Competition is needed for growth in the Market. Thus the introduction of Competition policy
becomes inevitable in the Market. On the basis of Competition Act 1998, Enterprise bill 2002,
Office Fair Trading, competition Commission Act and regulatory mechanisms such as
Companies Act 2006 the competition Policy is created in U.K. Competition Policy is for assuring
the fair competition among the organizations in the Market. (Museum of London , 2012)
Through this Competition Policy, Sainsbury PLC is competing with the competitors like Asda,
Tesco, Waitrose, and M&S. Sainsbury is forwarding towards new inventions and new own
branded products which will dominate the U.K. market in near future. Moreover, with the
compliance of Regulatory mechanisms such as wage to the workers, employment opportunities,
and working for the betterment of the environment all are given importance by the Sainsbury
PLC. Through these activities, Sainsbury is able to create a Sustainable image in the Market with
the satisfaction of the Customers. (Lake, 2009)
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Task 3
3.1 Market structures and determination of pricing and output
decisions of Sainsbury PLC
Pricing and Market Structure are two components in the economy, which are internally related.
Sainsbury has no free will to determine the prices of it products so that it can make higher profit.
Market Structures are different types such as:

Perfect Competition
Monopoly
Monopolistic
Oligopoly

In perfect competition market Structure, Consumers have too many choices to b e made and the
number of sellers is high. Sainsbury PLC is operating in Perfect Competition Market Structure
where the similar or identical retail chains are available in U.K. Here, Sainsbury has low
influence over the pricing of the products, as the consumers are not obliged to come to the
Sainsbury PLC for buying their needed products. Asda, Tesco, and other retail chains are there to
serve the customers. Thus Sainsbury has no choice to make the Price; rather it has to depend on
the pricing of the competitors. (J Sainsbury Plc)
As the main business of Sainsbury is on Food and Grocery items, thus the demand of products of
Sainsbury will not be out of market, rather people must come to buy the items of Sainsbury PLC.
In this way, the Market Structure of Sainsbury PLC determines the Pricing and output decisions,
where it never allows Sainsbury to make high Profit. (Engel, Blackwell, & Kollat, 1978)

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3.2 Market forces shape Sainsbury PLC U.K.

Market Forces are considered due to their impact on the decision making of the Organizations
and companies like Sainsbury PLC. There are different types of Market forces such as :

Demand and Supply

Elasticity of Demand and Elasticity of Supply
Economies of Scale
Customers expectations
Short run and Long run concept
Technology with employee skills (Bass & Avolio, 1994)

Demand and Supply

All of the above market forces can shape the Sainsbury PLC U.K. Demand and Supply is firstly
important due to its influence on Sainsbury PLC. For Example, if Sainsbury PLC wants to
produce a new type of grocery items, which will be easy to prepare, then Sainsbury Must analyze
the Supply and demand with respect to that Grocery item.
Elasticity of Demand and Elasticity of Supply

Elasticity of demand is an important force due to its responsiveness with the quantity demanded
and the price offered. For example, if Sainsbury wants to make a rapid sale of some stocks in
hand at the year end, Sainsbury must offer discount to the customers, where price will be lower
than the regular price.
Economies of Scale

Economies of Scale mean the cost advantage, where the cost of outputs will be lower if the
number of outputs is increased in case of Sainsbury PLC products. For example, If Sainsbury
Produce food items in larger units that will lower the costs of making through the Learning curve
theory.
Customers expectations

Customers Expectations is another Market force that shapes Sainsbury PLC. In case of
producing products, the need and expectations of customers are prioritized over other factors.
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For example, in case of Sainsbury a trendy clothe will be produced highly, if the customers find
it comfortable as well as fashionable. With respect to the customers choice, similar types of
clothes will be innovated in Sainsbury PLC.
Short run and Long run concept

The Short run and Long run Concept of economy can be forces that shape the Sainsbury PLC. In
short run, one factor of production is fixed always, where in Long run factors of production are
variable. For example, the machineries of Sainsbury PLC are used in order to produce the
products where machineries are one of the Long run factors.
Technology with employee skills

Technological development along with the skill of the employees is one of last but not least
important forces that shape the Sainsbury PLC. For example, with the technological development
Sainsbury has introduced the Online shopping, where the employees are the key factors to
maintain the Online Business of Sainsbury PLC U.K. (J Sainsbury Plc)

3.3 cultural environments shape the behavior of Sainsbury PLC

In order to run a Business successfully, it is mandatory to understand the environment of the
Business properly. Business Environment is comprised of two factors, namely internal and
external factors. The cultural environment is the environment, which is uncontrollable by the
Business. (Griffin, 2011)
The cultural environment defines the production, pricing, placing and promotion of a Business
Like Sainsbury PLC. Consumers beliefs, attitudes and values are the external factors of the
cultural environment of Sainsbury PLC, which have influence on the business as well as
production choices of Sainsbury PLC. (Brooks, 2003)
On the other hand, the employees of the organization and their cultural demands and attributes
form the internal factors of Cultural environment of Sainsbury PLC. If the employees are abided
by strong values and ethical consciousness, then it will ensure the ethical awareness of the
company as a whole. On the Other hand, if the employees are morally weak, then the theft and
misuse of resources in Sainsbury PLC will be noticed. Thus the Cultural Environment shape the
behavior of Sainsbury PLC. (Crane & Matten, 23 Oct 2003)

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Task 4
4.1 significance of international trade to Sainsbury PLC
The U.K. Economy is regarded as third most open economy of the World. The Significance of
international Trade in U.K. Retail industry is obvious and commendable for the growth of U.K.
economy. Sainsbury is one of the leading retain chain in U.K. where the significance of
International Trade to Sainsbury PLC is noticeable. Through the International Trade, Sainsbury
PLC has attained the benefits of minimum cost of communication as well as cost of
transportation. Moreover, International Business and trade Opportunity make the Business of
Sainsbury PLC more innovative and Technologically Sound. International Trade Helps the
Sainsbury PLC to build strong networks all over the world with reference to Suppliers,
customers, shareholders and employees. (Bass & Avolio, 1994)
Moreover, International Trade brings the opportunity of transferring capital with minimum costs,
which leads to the sustainable growth of the Business in the long run. Transfer of intangible
assets, like knowledge and skills, ideas is facilitating the Business of Sainsbury PLC as well as
its Strategy implementation becomes easier with these assets. International Trade offers more
employment opportunities with respect to Sainsbury PLC in U.K., where different cultural values
are integrated for the betterment of service and customers satisfaction. The investment
opportunity rises due to the impact of International Trade, which is essential for the sustainability
of Sainsbury PLC. Moreover, the Brand image of Sainsbury PLC is attained its best level only
because of International Trade. (J Sainsbury Plc)

4.2 Impact of global factors Sainsbury PLC

The global Factors have direct impact on the existence of Sainsbury PLC. The rising economies
of the developing countries can pose a great threat to the operating activities of Sainsbury PLC.
If the growth of the countries is rising rapidly, then the Suppliers in the developing countries will
charge higher price for raw materials to Sainsbury PLC in U.K.

With the essence of

Globalization, Sainsbury PLC must look for new markets before the competitors in order to
create the competitive advantage over the rivals. The emerging markets will be a new source of
14

Employment as well as innovation for Sainsbury PLC, if the company makes the best use of the
Markets. Sainsbury PLC should analyze the regulatory environment of the Global Business in
order to comply with the regulations properly. If Sainsbury fails to do so, the global image of the
Business will be negatively affected and the reputation will be tarnished. However, the policies
of World Trade Organizations can be a source of relaxation for the business of Sainsbury PLC.
The company should get the advantage from the World Trade Organizations by making synergies
with other countries as well as other organizations. (J Sainsbury Plc)

4.3 Impact of policies of the European Union on Sainsbury PLC

The European Union has its influence over the U.K. business with respect to Sainsbury PLC. The
business of Sainsbury has affected by the policies of European Union to some extent. The
Climate Change Act of European union has targeted the amount of maximum Carbon emission,
where organizations who have less carbon emissions will be benefited. To comply with this Act,
and to establish the image as a concerned entity for the environment, Sainsbury PLC has tried to
limit the amount of Carbon Emission. If the company fails to comply with this Act then it will be
unfavorable for the Business of the Company. This unfavorable condition negatively affects the
Brand image of Sainsbury PLC. Regional Policy of the European Union helps Sainsbury to
enlarge the business through the increase of production and sale. (J Sainsbury Plc)

Conclusion
Business Environment has many forces that shape the business segment as well as product line.
In this particular assignment, the Business environment of Sainsbury PLC is analyzed with
respect to some of the factors such as Market structure, key responsibilities of the Sainsbury PLC
etc. The impact of Fiscal and Monetary Policy on the Business of Sainsbury PLC has given
15

importance here along with the impact of cultural Environment. Moreover, the importance of
International Trade as well as the impact of Global factors on Sainsbury PLC is described with
the essence of globalization. Lastly, the policy of European Union and its relation to the
Sainsbury PLC is presented with reference to the particular policies. At last it can be said that,
the Success and Sustainability of Sainsbury PLC is greatly dependent to the Business
Environment.

16

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