Table of Contents
P 2.1 Giving relevant examples, briefly explain how different economic systems such as: command, free enterprsie, mixed and transitional systems attempt to allocate resources effectively with refernce to Sainbury PLC. 6
The aim of present task is to understand and highlight the purpose of organizations towards the business. Business organizations are having different purposes and organizational structure through which they operate in the market and fulfill objectives set by stakeholders involved in the business. It is important for any business organization to sense the national environment and market environment so that based on the environment faced an organization can develop its strategy for attaining business goals (Heizer and Render, 2003). In the present context example of Sainsbury PLC would be taken in order to understand the organizational purpose, market environment, national environment and global forces shaping the business of the organization. Below learning outcomes would be served through present paper:
LO1 Business organizational purpose
LO2 Nature of national environment
LO3 Organization behavior in market environment
LO4 Assessment of global factors shaping business activities in England
These learning objectives would help in analyzing the overall business organizational environment confronted by Sainsbury PLC in the retail market. Sensing environment would be helpful for the organization to understand the strategies which need to be adopted so as to reduce the external impact of these factors for achieving organizational goals.
Task-1 Business organizational purpose
P1.1. Explain briefly the following types of organisaitons and thier purposes:
- Virgin Group LTD
- Sainsbury PLC
- MC Donalds
- National Health services (NHS) England
- A corner shop near where you live.
Business organizations pertaining to UK can be mainly divided into two sectors which are private organization and public organizations. Private organizations can take several forms such as sole traders, partnership, pvt ltd and franchises while public organizations would be in form of public ltd, owned by local government, central government or non profit organization run by government etc. The organization type and their purpose can be given as under:
- Virgin Group Ltd: It is a private limited company and it was established in year 1970. This compay raise the capital from 50 shareholders by issuing the shares of the company. Company is operated in such a way that any external person can’t take the ownership and there are several restrictions over the shareholder for not trading their share to public (Galloway, 2010).
- Sainsbury Plc: Sainsbury Plc is a publicly traded company established in UK and initially constitution of the firm was proprietorship. Company aimed at increasing the capital through capital market by issuing the share to public and giving ownership to them.
- McDonald’s: McDonal’s is having the franchising structure of organization and operating in several countries across the world with brand recognized as biggest food chain. Anyone can taken the franchise from the organization by making contract with the company at their standard conditions. Company has the purpose for reducing their risk and cost for getting globalized by getting into the franchising structure.
- National health services: NHS is funded through public sources and it’s a non profit organization made for providing health services to the citizens of UK. NHS does not have the sole aim of making profits through its operations but the preference is given to imparting high level of healthcare services to the citizens in UK.
- A corner shop: Corner shops are having small business operations and operating under sole trader model. These shops have complete autonomy to operate through their own business model and having the purpose of making profit through deploying owners fund and knowledge into business.
P 1.2 Considering Sainsbury PLC, describe the extent to which it meets the objectives of its different stakeholders.
Any individual or organization having direct or indirect interest and impact from action can be considered as the stakeholder. Each stakeholder would be having certain expectations based on the level to which this organization meet their expectations. The extent to which Sainsbury Plc meet objectives of their different stakeholders can be given as under:
- Customer: Customers are the vital stakeholders in retail industry and consumers expect high level of customer service, quality products and lower prices from Sainsbury Plc. The first preference should be allocated to the consumers by Sainsbury Plc before considering expectations from other stakeholders. The major reason for considering first preference to consumers would be unsatisfied customers would lead to failure of business (Slack, 2010).
- Shareholder: Shareholders can be considered as the business owners and management works in interest of the shareholders of the company. Shareholders are having demand for enhancing their wealth through dividend gained and increase in share prices of Sainsbury Plc. Shareholders would expect rational return for the investment made by them.
- Employees: Sainsbury deploys large number of employees worldwide and employees expect to have good opportunity for growth and expect renumerations to meet their needs. Employees are also a part of the overall information flow established in the company.
- Government: Government authorities set the rules & regulations for business operations pertaining to taxation, consumer welfare protection and business licensing etc. Sainsbury plc has the liability to achieve the business objectives by following government guidelines.
- Suppliers: There are large numbers of suppliers for Sainsbury Plc as company has diversified into several products and these suppliers expect from Sainsbury to provide flexibile credit terms and good payment system.
P 1.3 Considering Sainsbury PLC, explain its various responsibilites as an organisaiton and the strategies it employs to meet them.
Sainsbury Plc has different set of responsibilities and objectives to meet for their stakeholders. Strategy deployed by Sainsbury to meet responsibilities of their stakeholders can be given as under:
- Responsibility towards their shareholders: Sainsbury Plc has the responsibility to provide shareholders with key information so that they can maximize their worth and profitability in the organization. Financial statement provided to the shareholders should be such that they can rely on that and make decision according to them. Sainsbury has its own website where information is displayed for the shareholders.
- Responsibility towards customers: Sainsbury offer high level of customer service and products with premium quality. Sainsbury has deployed highly efficient CRM processes within the organization so as to maintain loyal customer base by enhancing their satisfaction level towards the organizational products and services (Nordhaus, 2009).
- Responsibility to employees: Sainsbury has the responsibility to offer growth opportunity to their employees. Sainsbury Plc manages good human resource management policies so as to meet their objectives towards employees of the organization.
- Responsibility to society: Sainsbury Plc has high level of corporate social responsibility in order to give back to society and there are mainly four responsibilities which Sainsbury Plc has towards organization and these are economic responsibility, legal responsibility, ethical responsibility and discretionary responsibility.
Figure 1: Showing the responisbilities of Sainsbury Plc towards society
Task-2 Nature of national environment
P 2.1 Giving relevant examples, briefly explain how different economic systems such as: command, free enterprsie, mixed and transitional systems attempt to allocate resources effectively with refernce to Sainbury PLC.
There are several economic system followed in marketplace and these economic systems would allocate the resources available between different stakeholders of the economy. Some of the key economic systems along with their capability to allocate resources can be given as under:
- Planned or command economy: In planned or command economic system government would be having the entire control over economic resources such as capital, land and labor etc. Government would posses entire information and would try to allocate resources according to information available to them. But these economic systems are not considered to posses ability for allocation of economic resources with high efficiency. Due to lack of knowledge and lower efficiency level planning body would not be in position to make decision regarding what amount of production need to be done and there would be always surplus or shortage for the products in such economy (Broady-Preston & Steel, 2012). For Sainsbury Plc it would be really difficult to operate under such economic environment.
- Free enterprise economic system: In this economic system all organizations can operate with little degree of intervention from government authorities. In such economic system there are small number of business organizations operating in market and flexibility would be there to operate the business activities. This economic system would lead to high degree of positive competition in market hence efficient resource allocation would take place.
- Mixed economic system: In mixed economic system government intervention would be much higher as compared to free economic system and there would be several policies such as monetary and fiscal to control to economy. Figure 2 below shows the mixed economic system wherein there is flexibility of both free market and restrictions hence this economic system would be having high degree of efficiency for resource allocation. For Sainsbury Plc major advantage of mixed economic system would be implementation of their own policies so as to manage the impact of government fiscal and monetary policies.
Figure 2: Showing the mixed economic system
- Transitional economic system: Transitional economic system would be having a transition from centrally planned economy to the market economy. In these economic systems prices would be set by the market forces and these economies are considered to be highly efficient in resource allocation.
P 2.2Considering Sainsbury PLC UK, assess the impact of fiscal and monetary policy on their activities.
Government in UK makes use of the fiscal and monetary policies in order to control the economy. These policies are adopted by the government authorities in order to impact the business activities of different organizations as below:
- Interest rate variations: With change in monetary policy of government interest rate would also changes. Increasing interest rate would create problem for Sainsbury plc as cost of capital would increase for the company. Reduction in interest rates would be beneficial for the company as it would be able to get higher amount of funds with lower cost increasing overall business margins of the company (Allen, 2011).
- Reserve requirement variation: With increasing reserve requirements consumers would have to deposit higher amount and their spending would reduce. Hence Sainsbury would have an impact of higher reserve requirement as their sales volume would tend to lower down and vice a versa.
- Exchange rate change: Any increase in value of Pound would create changes for Sainsbury plc as well. The overseas businesses of Sainsbury would face problems while domestic operations of the company would involve higher sales voluem and margins as well.
- Tax regulations changes: Reduction in tax rates through change in fiscal policy of government would have considerable impact on Sainsbury Plc business activities as lower tax implications for company would allow higher production and higher investments into the advertisement as company would be having sufficient busines margin with reduction in tax.
- Change in government spending: Reduction in government spending can lead to lesser development for the particular sector hence Sainsbury may face difficulties for their business operations. On other side with reduction in government spending demand for the products of private sector such as Sainsbury Plc would increase.
P 2.3 Explain the impct of competititon policy and other regulatory mechansism on the activities of Sainsbury PLC UK.
Impact of competition policy and other regulation mechanism in UK on Sainsbury Plc can be given as under:
- Competition policy: There is stiff competition in UK retail sector wherein several business organizations are operating with similar business model and resources. Some of the key market players in UK retail domain would include Sainsbury Plc, Tesco, Asda, Morrison etc. With change in competition policy from government or from competitior would stimulate action from Sainsbury Plc as organizations need to adjust their actions in accordance with the market competition so as to remain in business.
- Impact of other regulating mechanism: Government in UK has several regulating mechanism which regulates the operations of business organizations operating in the market (Gitman & McDaniel, 2009). Sainsbury Plc can have both positive as well as negative impact through these regulating mechanism depending upon type of regulating mechanism adopted by government authorities. For example, any imposition of standard product maintenance and quality check in retail food domain would lead to higher costing for Sainsbury Plc as they need to manage their products in accordance with the government guidelines. In such cases Sainsbury plc would have to respond to these regulations by enhancing their product price or impose higher efficiency in their business operations so as to reduce the cost.
Task-3 Organization behavior in market environment
P 3.1 Explain how market structures determine the pricing and output deicisons of Sainsbury PLC UK.
In market there are several structures which may exist and following these structure would lead to change in the pricing and output decisions for the business organizations operating in market. Some of the major market structures operating in market and their impact on pricing and output decision of Sainsbury Plc can be given as under:
- Monopoly: Markets in which there is only one or two players operating in the market and in such market structures organizations would set the price so as to maximize their profits without considering willingness of consumers to pay particular price. In such market structures profit maximization would be done through equating MC and MR. A firm can’t choose both P & Q in such market scenario and monopolist are always constrained by their demand curve.
- Oligopoly: In Oligopoly market structure company makes use of the top level competitor system and consumer demands are considered accordingly. Prices are set in the market for signalling to market entrants. The prices set by the organization would show their intent to save their market share.
- Perfect competition: In the perfect competition market scenario there would be numerous organizations dealing in the market. At present Sainsbury Plc is under stiff market competition position in UK retail market and there is high efficiency which which these organizations are dealing in the market (Martins and Terblanche, 2013). In such market scenario Sainsbury does not choose the price which would be taken from the consumers but company set the production quantity based on their overall cost including the opportunity cost of the company. Decision pertaining to the output would be taken based on the profit expected by the company and future strategy of the company to remain in the market.
P 3.2 Illustrate how market forces shape Sainsbury PLC UK responses using a range of examples.
There are several market forces which would be shaping the strategic decision taken by Sainsbury Plc and some of the key market forces would include elasticity in demand & supply, supply & demand, consumer perception and cost of output. The strategy adopted by Sainsbury Plc so as to respond to these market forces can be given as under:
- Demand and supply: Sainsbury would make supply decision based on the demand of products in market. Hence in case demand for the products is high in market then Sainsbury Plc would procure higher products from their suppliers and fulfil the demand of consumers.
- Economies of scale: In order to produce or procure high volume for the products Sainsbury need to consider the economies of scale as this would directly impact the decision og high volume procurement for the company. Sainsbury Plc has achieved economies of scale hence company is able to procure in large volume so as to meet the consumer demand.
- Cost and output: In case of increase in cost of the particular product, Sainsbury would make the decision for procurement by evaluating the overall profitability gained by the organization by supplying the products to consumers.
- Customer perception and action: Sainsbury always consider the consumer perception towards particular product and action taken by the consumers before making purchase decision for the particular products. In case consumers would be highly sensitive to change in price and expect good quality then company would tend to increase quality without affecting price (Scaner, 2009).
P 3.3 Explain how the business and cultural environments shape the behaviour of Sainsbury PLC UK.
An organization need to consider various culture and business environment factors for making decisions in the buisness environment. Business environment of Sainsbury Plc can be analyzed in view of PEST factors as under:
- Political factors: Political environment in UK is quite stable and government makes several supportive regulations in order to encourage business organizations. Sainsbury Plc would develop the policies in accordance with the government regulations developed.
- Economic factors: Some of the key economic factors impacting business environment in UK for Sainsbury Plc would include interest rate, inflation rate, exchange rates and GDP. UK has favorable economic conditions so as to make Sainsbury Plc activities easier.
- Social factors: Social factors impacting the business activities for Sainsbury Plc would include consumer expectations, action and perception as these factors would impact the business environment.
- Technological factors: With changing technology in the business context it is important for Sainsbury Plc to adjust their business processes so that both can remain in harmony with each other and suitable use of technology can be done so as to bring efficiency in the business processes (Kotler and Keller, 2010).
Along with the above mentioned factors Sainsbury also considers the cultural factors impacting the organizational activities. The marketing policies of the Sainsbury would be such to include the cultural factors prevailing in UK.
Task-4 Assessment of global factors shaping business activity in England
P 4.1 Discuss the significance of international trade to Sainsbury PLC UK.
There are several factors which are encouraging international trade in UK for Sainsbury Plc and these includes transportation system, modern production techniques and transnational corporations etc. These factors are allowing the business organizations such as Sainsbury Plc to operate in other countries without having trade barrier for operating in foreign countries. International trade is of immense importance for Sainsbury Plc as company need to expand its market share in worldwide locations and increasing global trade would allow Sainsbury Plc to develop its market share in different countries and enhance brand image of Sainsbury among the global consumers. Global expansions for Sainsbury Plc are of vital importance in some of the developed countries especially in European Union (Baron and Greenberg, 2008).
In case international trade is hampered in UK, then the major capability of Sainsbury Plc for having economies of scale would not be much of use to them. Economies of scale at present allows Sainsbury Plc to leverage on this capability so that higher revenue can be generated with much lower cost for the revenue generated by the company. International trade for Sainsbury Plc allows the company to outsource its some of the business operations which are not of strategic importance so that company can focus more on its core activities and along with this cost of operations can be significantly reduced. A company would always be beenfited through the competitive international trade as it would benefited both the companies in domestic country as well as company from the foreign origin. One company would be benefited for the specification while other company would be benefited through the reduction in cost of its operations. Hence internaitonal trades are of strategic importance for Sainsbury Plc wherein organization would be benefited by enahncing their revenue, market share and strengthening the brand. Along with this the cost of operations would be reduced by outsourcing and focusing on the core business activities of company.
P 4.2 Analyse the impact of global factors on Sainsbury PLC UK.
Global factors holds vital importance for an organization when the company is operating globally or only in domestic country. Sainsbury being a multi national player in retail segment has several key global factors which are impacting the overall business activities of the organization and can be given as under:
- International competitiveness: There are several big international players creating high competition in the retail domain and irrespective of the business operations of a country in domestic or foreign country these big players would create high competitiveness (Daniels et al, 2007). Some of the major players in domestic as well as foreign markets for Sainsbury Plc would include Walmart and Tesco.
- International business environment: International business environment for Sainsbury Plc would include consideration of the external factors such as political, economic, social and technological factors. These factors need to be considered by Sainsbury Plc in order to develop their business strategy and minimize the adverse impact of external business enviornment on business activities of the organization. These business factors become even of higher importance at the time when Sainsbury Plc is operating in the international markets.
- Exchange rates: Change in exchange rates of a country would also impact the overall revenue gained by the business organizations such as Sainsbury (Burnes, 2009). Further any vital change in the exchange rate of pounds may create threat of loss from the business activities for Sainsbury Plc. Company’s margin also depend upon the fluctuations in currency prices and in case these prices are not favorable for Sainsbury then company may incur singificant losses.
- Tariff and tax: In case the tariff and tax structure in global market would be on higher side then Sainsbury may face issues in the global expansion model. Sainsbury would not be able to compete with other market players and lower pricing would not be offered to the consumers so as to gain higher market share.
P 4.3 Evaluate the impact of policies of the European Union on Sainsbury PLC UK.
There are several business policies and regulations which need to be abide by the business organizations operating in UK and these business regulations have been imposed by European Union for their member countries (Hofstede et al, 2010). Sainsbury Plc need to abide by these policies in order to operate in Europe. Some of the key elements of the policies developed by European Union for business organizations would include below mentioned:
- Employment policies
- International trade policy
- Training and development policy
- Rules of game policy
- Regional policy
Sainsbury Plc need to understand the impact of each of these policies on their business operations not only in domestic country but also during the international business carried out by the organization. Depending upon the significance of each of these policies Sainsbury would set the organizational priorities and compay would develop their policy in order to abide by the rules stated by European Union for their member countries. Sainsbury Plc need to consider each and every policy so as to abide by these law so that company does not voilate any law and face consequences of voilating the rules implemented by European Union for their member countries (Joshi, 2009). Since Sainsbury Plc is a global organization hence company is also operating in several other countries which are a part of the European Union so these rules and regulations becomes of higher importance for Sainsbury Plc. By abiding these rules and regulations Sainsbury Plc would be able to avoid themsevles from any adverse legal implications for voilating rules in these European Union countries and these member countries would be able to provide higher facilities and support towards the business operations of Sainsbury Plc.
Present paper has revealed that a business organization such as Sainsbury Plc has to consider several internal and external factors impacting the business organizations. Sainsbury Plc is a public limited company and operating in retail domain in several countries. Sainsbury has meet the responsibilities and objectives of its stakeholders by developing suitable strategy. Super market industry in UK is under the perfect competition scenario so Sainsbury Plc have to adjust its business policies so as to develop its competitive advantage. Sainsbury is following the rules and regulations developed by EU so as to avoid any harmful legal consequences for the business operations of the company.
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