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Contemporary Business Environment

Contemporary Business Environment of Sainsbury

Abstract

Contemporary Business Environment is vastly related with Natural environment, cultural environment, political environment and economic environment. Economic environment means the economic conditions, different economic policies and economic system. Non-economic environment includes countries socio cultural economy, natural environment, and cultural, political, legal, technological and demographic environment. In that case, Economic policies are the part and parcel to adjust the economic situation of any country. The monetary policy of the country deals with money supply and fiscal policy helps to adjust the spending of the government relating with the government revenue from tax and vat taken from the people of a nation. Inflation rate, Foreign Currency, Taxation and International trades have great impact on economic system.  Brexit regulations, Virus and Diseases, Tourism and Travel and International students and education have also impact on economic conditions strength or weakness. Non-economic environmental factors like demographics, natural and cultural environment have also impact on in global business.

1.0 Introduction

To do business in this competitive business environment as well as Contemporary Business Environment every company should have a knowledge of their business environment and this business environment is classified as- economic and non-economic environment. Economic environment means the economic conditions, different economic policies and economic system. Non-economic environment includes countries socio cultural economy, natural environment, and cultural, political, legal, technological and demographic environment. All of this economic and non-economic environment (Contemporary Business Environment) has a profound influence on business performance. It is better for every organisation to know about the country’s economic and non-economic environment because it helps top management to make the right strategy for the organisation. In this study researcher choose Sainsbury and the reason is researcher can easily access a lot of information of Sainsbury.

1.1 Company Background

Sainsbury started their journey in 1869 and the founder of Sainsbury was John James Sainsbury. In 1922 Sainsbury expanded their operation and started selling all types of grocery products, food items and also engaged in financial markets. Sainsbury sells all kinds of grocery product, household, clothing, electronic and fresh fruit, vegetables etc. Sainsbury divide their business into 3 different segments such as- Sainsbury supermarket, Sainsbury Bank and Sainsbury Argos.

Sainsbury is the 2nd largest supermarket in UK after Tesco and they have 15.3% market share of UK retail industry. Sainsbury operating income of 2017 was 26,224 million. More than 1,81,900 people are currently working for Sainsbury. The main competitor of Sainsbury are Tesco, Morrison, ASDA, Lidl and Aldi. Sainsbury is constantly investing their money to develop their business operation. Sainsbury invested £150 million to reduce their price and it helps them to offer better price to their customers. Sainsbury is popular in UK market because of their excellent customer services. Sainsbury HR team is very effective and they always provide best facilities to their employees which makes them loyal towards Sainsbury. In the following part of this study researcher discuss how economic and non economic environment impact the business organisation and how it affects Sainsbury’s business.

2.0 Literature Review

2.1 IMPACT OF ECONOMIC ENVIRONMENT ON BUSINESS BEHAVIOUR

2.1.1 ECONOMIC POLICIES

Economic policies are the part and parcel to adjust the economic situation of any country. The monetary policy of the country deals with money supply and fiscal policy helps to adjust the spending of the government relating with the government revenue from tax and vat taken from the people of a nation. Here some of the economic policies are described as follows:

Consumer laws: Consumer law is the rules and regulations designed to protect products and services prepared for the consumers. It is the way to maintain safety and security of the consumer’s goods and prevent unethical business people from wrong doings (Vernon and Wells, 2011). It is helpful to ensure the betterment of the consumer’s products and protect them from any kind of misuse.

Monitor Prices and Tariffs, duties on imports and export: It is necessary to monitor prices and tariffs and also duties on imports and exports to enhance the better management of the international and national products. Tariffs enable government to charge on the freight and insurance of imported goods (Sloman, 2016). The government can also impose duties or tax by increasing the products price and reduce market competition.

EU Laws: With the changes of Brexit it is important for UK to focus on their law and regulations related to European Union and also focus on the rules and regulations of national and international trade to take the power over international aspects of the organization (Vernon and Wells, 2011).

2.1.2 ECONOMIC SYSTEMS

Economic system is the combination of different kinds of economic system working in different sectors of Contemporary Business Environment.  They are:

  • Traditional economic system: Traditional economic system is an ancient system of economy where the surplus factor is rare.
  • Command economic system: The command economic system focus on the central power of the government to maintain a well-balanced and healthy economy with a specific plan to use the better management of the resources (Sloman, 2016).
  • Free economic system: In the free economic system there is no government intervention is available. All the business organizations and firms are free to produce good and materials of production as per their needs (Satryo, 2018).
  • Mixed economic system: Mixed economy is the combination of command economic system and free economic system. It is the system where the government deals with specific and core concerns. As the economy has no government intervention in some specific condition to allocate the resources available in the economy.

All these systems have the impact on the following issues:

Inflation rate: Inflation rate can increase the prices of the raw materials and effect on the product prices. It can also impact on the business condition and overall economy of UK.

Foreign Currency: Changes in the foreign currency and their exchange rate can affect the flow of the exchange and rate of the market in a significant way (Satryo, 2018). It can diminish the business flow and also create problem for the business management related with the exchange of foreign currency.

Taxation: Tax is deducted from a person’s income or any organization’s profit to deal with public services. The rate of taxation is decided based on the instruction of the government. Direct and indirect tax both are important for the development of the economy (Poželaitė and Jonuškienė, 2013). Here the over taxation rate can hamper the growth and business of the organizations sometime.

International trades:  International trade of goods or services traded can get effected by economic policy of different nations. Here the trade barriers, overrates tax, tariffs etc. can hamper the business function and operations all over the world. It can also make some specific industry suffer or flourish from the business activities of specific econom (Poželaitė and Jonuškienė, 2013)y. Here are some specific rules and regulations are implied on the business policy and trades for exchanging unethical or harmful product and services across the border.

2.1.3 ECONOMIC CONDITIONS

Brexit regulations:  Brexit is a turning point for European Union and UK for the different rules and regulations and business policy of different organizations. Here the functions, policy of the business, operations management, and competition pattern of the business will change with the regulations in the brexit policy and it can also effect the business condition of the home and abroad countries as well (Ncube, Soonawalla and Hausken, 2017).

Virus and Diseases: The economic condition is already getting effected by the pandemic condition of Corona virus in different nations. The outburst of the virus making the economy shut down their activities for proper precaution. UK is also getting affected by the adverse effect of the virus, which is slowing down the international and national business activities all over the world.

Tourism and Travel: The tourism and travel industry is facing challenges for the corona virus terror in all over the world. Here the industry is facing challenges to survive or sustain in the long run for the spread of the virus in different countries (Ncube, Soonawalla and Hausken, 2017). Most of the countries are shutting down their travel and tourism facilities for the betterment of the condition.

International students and education: The education and migration in different countries are getting challenged for the international students. Here the students are facing problems in their educational sector so the system of educational policy is getting damaged with the current situation (Jacob, 2013).

Sainsbury in the light of Economic Environment

  • Sainsbury offers many kinds of products in different prices based on different economies. They offer the products and services in a cheaper rate by maintaining quality of UK and follow consumer laws to eliminate the unfair means of the suppliers.
  • The business of Sainsbury is adopting new rules and regulations to adjust with the business condition of UK and brexit.
  • The organization also follow all the tariffs, duty and tax rules of different countries imposed on products and goods for promoting the international trade system (Jacob, 2013).

NON-ECONOMIC ENVIRONMENT AND HOW IT SHAPES ORGANISATIONAL BEHAVIOUR

    • DEMOGRAPHICS Environment

Demographic: Demographic environment refers to the customers’ age, occupation, incomes, education level etc. to understand the demographic setup of a nation. To run business the components of demographic environment need to focus on the business environment (Hollis, 2013). Here Sainsbury has a customer group of young to adult, male, females based on their needs, demands and requirements.

Gender, age and Religion: Age, gender and religion effect the choices and preferences of people based on their different choices and specific need. Here the Sainsbury offer the products and services based on the different profiles of the customers (Hollis, 2013).

Language: The changes and pattern of the languages make the organization to choose their employees from local territory to ensure better business policy for the specific region.

Income, Purchasing power and Occupation: Income, purchasing power and occupation of the Sainsbury organization provide the buyer and sellers power to make better and well decision for purchasing different products and services.

2.2.2 NATURAL ENVIRONMENT

2.2.2 Natural Environment

Natural environment of the organization are formed with the natural resources available in the specific territory of the organization. Here the natural environment can effect on organizational behavior to change or shape it based on the requirements of the organization (Guy, 2015). The factors which are related to change in the natural environment are given below:

Food resources

Different kinds of food resources are needed for different types of products. Here the resources can be water, land, different materials etc. so the organizations need to choose the resources based on the region or territories abounded with different resources.

Weather and climate: the weather and climate can affect the changes in the price of the resources, their maintenance and availability so the favorable weather can provide positive results whereas the unfavorable environment can hamper the setup by the overall weather and climate condition.

Topographic factors: There are many topographic factors such as sunlight, rain condition, wind and other climatic situation can affect the business to expand or reduce their business in different situation and in different places (Guy, 2015).

Natural Environment condition in Sainsbury

  • Here the organization response and changes its policy with the natural requirement of UK or any other countries.
  • Sometimes the organization suffer for the changes of the natural condition or natural disasters.

Organizational Culture

Organizational culture focuses on the organization nature, beliefs, attitudes and attributions based on the environment of the organization. It is very important for the organization to focus on the culture to maintain a well-balanced environment among the employees of the organization.

  • Norms and values: It is important to maintain norms and values of the organization to enhance the good will of the organization. Sainsbury focus on their norms and values strictly and make the employees follow the norms and values to maintain company reputation with their attitudes and behaviors.
  • Approach to customers: The approach to the customers need to focused on the employees work and their way to dealing with customers. Here the employees need to maintain good relationship with the customers. It helps to build a strong customer base and make the relationship long-lasting (Gani and Clemes, 2013).
  • Dress code and attire: The dress code and attire of the employees are decided by the organization based on the work condition and nature of work and overall environment. Here the attire and dress code are decided based on the organizational culture and the preferences of the organization.
  • Skills and expertise: Skills and expertise are formed with the overall management of the organization and making the process of organization well-structured. The organizational expertise can be formed based on the requirement of the organizational needs and demands (Gani and Clemes, 2013).

Sainsbury’s Cultural Environment:

  • Sainbury is one of the leading organization to maintain strong cultural environment in their organization.
  • They are operated in different countries such as UK, Canada, Australia, Mexico etc.
  • They provide special care to the pattern of the business and design their products and services based on the needs and requirements of the customers (Ermolina, 2016).

SWOT analysis

Contemporary Business Environment
SWOT analysis of Sainsbury (Contemporary Business Environment)

SWOT analysis helps organisations helps to identify and evaluate the strengths, weakness, opportunity and threats of the current business strategy regarding Contemporary Business Environment. In the following table researcher did the SWOT analysis of Sainsbury because it helps Sainsbury’s management team to understand their current position and to develop their future strategy (Balasubramanian, 2009)-

Sainsbury’s Strengths Sainsbury’s weakness
High brand image in UK retail industry;

Loyal group of customer in UK market;

Famous for their excellent customer services;

Efficient and dedicated workforce;

Diversified business;

Doing business not only in retail but also they have banks, insurance companies and mobile network business.

Offering products at competitive prices in Contemporary Business Environment.

 

 

Competitive pricing strategy reduces their profit margin level;

Only operating in UK market.

 

Sainsbury’s opportunity Sainsbury’s threats
Sainsbury is only operating in UK market but their rivals Tesco is operating more than 12 different countries so Sainsbury can easily expand their market in different international market.

Invest more money and develop the online sales because this market is growing;

Sainsbury can increase their Banking operation under Contemporary Business Environment (Hendrics, 2010.).

Too much competition in Grocery and retail market;

BREXIT issue is also a real threats. Due to this company might have to pay more tax on imported items from European countries (Mohammad Arabzad an, 2012)

 

PESTEL analysis

A PESTEL analysis is a strategic framework that used by the strategic managers to analyse and monitor the macro environmental factors regarding Contemporary Business Environment. Most of the managers prefer to analyse the PESTEL analysis because all of this factors have a profound impact on organisational performance. Companies analyse this tool before they start their business in one area or before expand their operation. Analysis of macro environmental analysis is very important because organisation cannot control those factors so if company find the macro environmental element is not favourable they should not start their business in that place. In this analysis and discussion part researcher discuss the Sainsbury’s PESTEL analysis for the UK environment (LIU and LI, 2017).

Political: Political environment greatly influence the organisational operation. Political environment means the Government influence on business such as- government regulation, political stability, rate of corruption, tax rate and foreign trade policy etc (LIU and LI, 2017).

If any country’s political environment is not favourable company should not expand their operation in that area because it is high risky. In terms of Sainsbury, they are enjoying a favourable political environment in UK. UK political environment is stable, government business policy is quite favourable for the business organisation. Only BREXIT issue is uncertain things because of this issue UK citizen saw 3 general election in last 5 years.

Economic: Economic environment also influence the business and it has a long term impact on organisational operation because of this every company should aware about the economic environment where they are doing their business. Economic factors such as- economic growth rate, unemployment, interest rate, inflation has a big impact on business (LIU and LI, 2017).

Sainsbury is doing their business in UK and they are selling daily products. Sainsbury is enjoying a good economic environment in UK because most of the consumers buying power is good and unemployment rate of is decreasing. Inflation rate of UK is also low but it is increasing gradually.

Social: Social environment represents the people norms, culture, beliefs, population growth, health awareness level, religion etc. All of this social factors affect the business and because of this Sainsbury always try to identify the social factors of a particular area and then they store products in their branches which can attract more people and increase their sales. For example: Different cultural background people lives in different parts of London so Sainsbury always consider the demographic factor of those areas population, their religious value, their lifestyle and food habit and based on this they store products in their branches. Because of this strategy they easily attract all people in their stores (LIU and LI, 2017).

Technological: Technological environment is quite important factor for all types of business company must be aware about the country’s technological advancement, research and development, innovation etc. Sainsbury can use all the advance technology in UK because in UK advancement of technology is quite high. Sainsbury use all the advance technology in their business operation such as- self scan, automated till, inventory management system etc (Strangmueller, 2018).

Environmental: Current the environmental factor is also very important because now Government motivating organisation to work for the climate change, carbon emission, pollution free activities. Sainsbury follows all the environmental regulation introduced by UK government and they also do different types of CSR activities to develop the UK environment (Strangmueller, 2018).

Legal: Legal environment of a country is also important and every company must be obey the legal legislation of country. Sainsbury is law biding organisation and they are following the health and safety law, labour law, environmental law, tax laws etc (Strangmueller, 2018).

Conclusion

Economic environment in terms of Contemporary Business Environment of the business can get affected by the changes and pattern of the business condition and also affect the operation of the business in favourable or unfavourable way (Ermolina, 2016). So the business organization need to become careful about the factors and take the necessary steps to make the business activities safe from the adverse effect of the economy as much as possible.

References

  • Balasubramanian, S., 2009. Sainsbury: A Swot Analysis. SSRN Electronic Journal,.
  • Ermolina, A. (2016). Business environment as the determinant of economic growth.  for International Business and Entrepreneurship Development, 9(4), p.417.
  • Gani, A. and Clemes, M.D. (2013). Modeling the effect of the domestic business environment on services trade. Economic Modelling, 35, pp.297–304.
  • Guy, F. (2015). The global environment of business. Oxford ; New York, Ny: Oxford University Press.
  • Hendrics, H., n.d. SYSCO Corporation SWOT Analysis. 2nd ed.
  • Hollis, M. (2013). The economic environment of business. Harlow: Longman.
  • Jacob, W. (2013). Economic and Business Environment. Vision: The Journal of Business Perspective, 17(1), pp.87–89.
  • LIU, X. and LI, J., 2017. SWOT and PESTEL Analysis on the Coordinated Development of New Urbanization and Agricultural Modernization in Heilongjiang Reclamation Area. DEStech Transactions on Economics, Business and Management, (3rd ed).
  • Mohammad Arabzad an, S., 2012. Improving Project Management Process in Municipality Based on SWOT Analysis. International Journal of Engineering and Technology, 4(5), pp.607-612.
  • Ncube, M., Soonawalla, K. and Hausken, K. (2017). The Links between Business Environment, Economic Growth and Social Equity: A Study of African Countries. Journal of African Business, pp.1–24.
  • Poželaitė, R. and Jonuškienė, E. (2013). THE INFLUENCE OF SOCIAL ECONOMIC BUSINESS ENVIRONMENT ON THERMOGRAPHY BUSINESS. Business, Management and Education, 8(1), pp.154–167.
  • Satryo, C. (2018). Free Trade Intervention: Political-Economic Intervention on Global Business Environment. Asia Pacific Management and Business Application, 007(01), pp.31–44.
  • Sloman, J. (2016). Economics and the business environment. Harlow: Prentice Hall/Pearson Education.
  • Strangmueller, M., 2018. A PESTEL Analysis Of The Company. 1st ed. pp.96-102.
  • Vernon, R. and Wells, L.T. (2011). The economic environment of international business. Englewood Cliffs (N.J.): Prentice Hall.

Written by

Md. Shadequr Rahaman

Email: [email protected]

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