The Impact of Key External Environmental Factors - Assignment Example

THE IMPACT OF KEY EXTERNAL ENVIRONMENTAL FACTORS. HERE YOU SHOULD USE NEEDLE’S (MODEL) DIAGRAM OF ENVIRONMENTAL LEVELS Introduction The environmental factors which determine the success or failure of a business include political, economic, social cultural, technological and legal frameworks as illustrated by Needle (2006). Business firms have objectives and goals which they aim at achieving as effectively as possible. This can only be made possible through ability to interact with the environmental factors which determine success. In addition, a firm should be able to manage the conflicts which are likely to arise among its stakeholders and ensure that they do not impact negatively on the business. This paper gives a critical analysis and discussion of the interaction of the Morrison’s Supermarkets with its environment and its implication on the performance of the firm. In addition, the stakeholders of the firm are anlyzed in terms of the potential conflict of interest. Wm. Morrison’s Supermarkets Plc Morrison’s Supermarket is a grocery retailer in the United Kingdom and is one of the largest retail business which has a large share of the food market. The supermarkets supply food ingredients to its customer base and it aims at providing fresh supplies as its selling point. This has greately has contributed to its emmense success. The supermatket has skilled and experienced food specialists who have enabled fresh food ingredients are provided to the customers. The interaction of the firm with its environment gives it a competitive edge against its competitors. Supply chain The Morison’s has its own supply chain which has enabled it to have a competitive advantage over businessess which supply the same products. In addition Morrison’s has its own production plants for its food products which means they manufacture, pack and grade their own products before they are supplied to the customers. The firm has 12 subsidiary centers which are involved in distribution of their producce across the country. The ability of the firm to supply fresh food ingredients is due to the fact that it has its own means of transport through which it effciently delivers fresh ingredients to its distributoes from where it reaches the customers while stilll in good condition. The Political and Social Environment Needle The conciousness of the society on health living has increased tremedously and this has impacted on the strategies used by retailers in promotion and marketing of their products. There is increased prevalence of obesity in the United Kingdom which has led to the involvement of the governmnet in attempting to reduce the obese cases in the country. According to Wm. Morrison’s Supermarkets Plc (2009), 23% of adults within the United Kingdom are classified as being obese. Pressure groups in the UK have attacked the retail market arguing that misleading labelling on foodstuffs by supermarkets are to blame for the unhealthy lifestyles in the country. Many families have therefore found it hard to balance their diet through proper food lifestyles. The regulation of the governmant on the food products of the Morrison’s include the determination of the sugar, salt and fat content of the food which is produced and sold to the public. This is due to the increased campaigns on the benefits of balanced diet that have caused the public to be concious on the amount of nutrients in the foods sold by supermarkets. Because supermarkets act as the major source of food supply to the public, they are blamed for the poor health among the majority of the UK citizens. Some segments in the UK food market are unable to access and supply healthy food to the public. As a result, the Morrisson’s have utilized this opportunity by providing the healthy and fresh inngredients at reasonable cost to its customer which has made the firm to be among the top suppliers of food ingredients in the United Kingdom. The food products produced by the Morrison’s include meat, vegetable and fresh fish products. The firm uses the strategy of providing the best for the community at prices which are competitively low. According to Wm. Morrison’s Supermarkets Plc (2009), the Morrison’s use a unique labeling scheme for their food products which enables them to beat their competitors within the food industry. This includes provision of the nutritional value of the food on the labels. To capture a wider share of the market, the firm has responded to the needs of society by providing food which is low in salt to enable the community to be healthier and this has made the Morrrison’s to be unique as compaired to its competitiors. The promotion of healthy lifestyles as a way of adhering to the governmnet directives of improving the health of the community is made possible by the Morrison’s through its health magazine. This magazine provides tips for health habits and recipes for preparation of health meals which has promoted health living in the United Kingdom. Jones & Comfort (2006) demonstrate that the Morrison’s are also engaged in health campaigns in the society through which they promote health lifestyles among the members of the society. Economic: Environmental Needle. The rising energy prises in the United Kingdom has led to the economical hardships in the UK. The economic factor has therefore caused the company to apply a unique approach of marketing and promoting its products so that the economic environment is taken into consideration. The economic hardships have been caused by the increased expenditure in the production energy. The rising interest rates of banks in the United Kingdom has reduced the investment rates due to inabilities to borrow. The taxation rate has also increased in addition to loss of jobs by many people. The response of the Morrison’s to this economic crisis within its environment is the launch of price cuts for its products to enable the customers afford the food ingredients producced and supplied by the firm. This move increased the confidence of the customers on the firm as compared to the competitor firms. The strategy of Morrison’s of regulating their prices in response to the economic hardships within the environment is therefore attributed to the success of the firm in the food market. Wm. Morrison’s Supermarkets Plc (2009) emphasizes that by reducing the prices of its products, the Morrrison’s did not compromise on the quality of the food products they sell. The customers have always wanted quality food products at cost effective prices which illustrates the ability of the Morrion’s to compete favorably within the declining economic environment. According to Sloman (2008) the strategies of Morrisson’s in response to the hard economic times were motivated by its awareness that the buying behaviors of customers change easily in response to the economic forces in the market which affect the quality and price of products. The negative impact of the economic environment on the Morrison’s is illustrated by the implication of the price reduction on its labor. The employees of the firm did not enjoy high compensation packages as before and therefore reduced their motivation in providing quality. In addition, the supply of raw materials for the food production in the manufactiring plants of the firm is negativelly affected by the economic environment. This is because the price of raw materals is higher which made the cost of production to be increased. The fact that quality was high and prices low contributed to the reduction in the annual income of the firm. Jones & Comfort (2006) asserts that the loss of jobs by many people due to the economic crisis led to the reduced income in households. This meant that expenditure on domestically manufactured food products was reduced. This led to a decrease in the income of the firm. Moreover the firm spent more cash in promotion and marketing of its products as a way of trying to maintain its customer base. Sloman (2008) explains that the social factor in the UK market which is tied to the economic factor is the buying habits and trends of the consumers. The buying trends of the market shifted fom the purchase of premium organic food ranges to standard range of products. This was caused by the increases in the cost of fuel, raw materials and cost of food. However, the Morrison’s was at an advantage because less people ate out inrestaurants. This meant that the domestic food products of the company enjoyed more sales than the standard range value added products. According to Ahmed (2008), the Muslim community in the UK which is increasing in number is another social factor which the Morrisson’s had to attend to. As a result , the firm produced a Muslim meat based product called Halal which was introduced to the Muslim market. This was part of the firm’s strategy of investing in new markets. Promotional campaigns for the Muslim product was launched by the firm but it did not go well because some Muslim consumers became hostile claiming that they prefered to buy meat from their favored butchers in the local market rather than from supermarkets. This illustrates how the social factors have impacted negatively on the firm especially in investments which turn out be unsuccessful. The Morrison’s collaborated with the National Curriculum in its “Lets Grow” campaign which was aimed at teaching school children on healthy living through nutritious and fresh food ingredients. This campaign was a success because many vouchers were issued to school children through the firm’s shoppers across the country which was then redeemed for firm equipment. This campaign acted as a good marketing strategy for the firm which also contributed to rapid increase in income. Legal: Environment Needle The legal regulations under which the Morrison’s has to operate include Food Hygiene, Health and Safety, Rules of Stock exchange and Handling of Hazardous Materials and Chemicals. These regulations have a direct impact on the transformation within the Morrison’s system which includes acquisition of raw materials, manufacturing, grading, packaging, labeling and supply of food products to the market. According to Wm. Morrison’s Supermarkets Plc (2009), the environmental factors which have implications on the achievement of the firm’s objectives have made it to apply strategies which facilitate the achievement of its corporate social responsibilities. This includes issuance of reusable carrier bags to its customers. The products of the firm are aimed at improving the health standards of the population which has led to the attainment of the societal objectives of the firm. Technology: Environment Needle The Morison’s invested in a remote Information Technology disaster recovery site. This was a backup plan to ensure that incase of data loss during the firm’s operations, it would be recovered. The transport fleet of the firm aimed at conserving the environment through minimal noise pollution, efficiency in fuel use and low carbon emissions. In its packaging and manufacturing the firm has installed its own technologies which have increased the efficiency and quality in manufacturing of food products. Technology has also been applied by the firm in its branches through scanning and queue management IT systems as demonstrated by Wm. Morrison’s Supermarkets Plc (2009). Conflicts of Interest among Shareholders Consumers Consumers who are the company’s customers are increasingly demanding to be aware of the source of the food products they purchase. This is due to the consciousness of the population on health living and therefore they demand the firm to meet its corporate social responsibility objectives without fail. The needs of the consumers include quality and healthy products at low prices including guidelines which provide them with health information. Moreover, the consumers demand security and comfort in the supermarkets and good services by the staff including high hygienic standards in provision of the food products. According to Wm. Morrison’s Supermarkets Plc (2009), the expectation of the consumers is that ethical and moral obligations of the Morrison’s suppliers of food products are met. Furthermore, consumers change their trends and tastes and they require the firm to effectively meet their changing needs. The community This is the society which lives near the firm’s manufacturing plants, stores and distribution centers. The society expects the firm not to misuse the resources within the environment. In addition, the preservation of the environment as a way of fulfilling the firm’s corporate social responsibility is demanded by the society. The pollution which would be caused by noise or waste disposal is not tolerated by the society. Employees The employees of the firm expect fair treatment, good conditions at the work place, job security and fair compensation. According to Wm. Morrison’s Supermarkets Plc (2009), ccontractors, managers, supervisors and directors of the firm require recognition and realistic human resource policies which include flexible contracts and working hours. In addition, the firm’s employees require training and development, provisions for leisure and health cover. Conflict of interest is likely to arise between the subordinates and their managers especially in perceptions and judgment on values which vary from one individual to another. Producers and Suppliers The trading standard of producers and suppliers are expected to be adhered to by Morrison’s. The producers expect fair wages from the firm which meets the standards in the market. Suppliers who are branded by the firm exercise more powers over consumers causing a conflict of interest. In addition, suppliers have a choice of the retailers to which they can supply food products to. There is potential conflict in the communication between producers and the firm. Moreover the suppliers and retailers may have communication issues related to the specification of the retailer needs which may tamper with the supply of the food products. Shareholders Good and fair returns on investments are expected by all shareholders of the firm. Therefore the firm is obliged to effectively return the dividends of the shareholders who expect the firm to provide high earnings per share of their investment. The firm is expected to utilize the equity of the shareholders properly. The demands of the shareholders for the expansion of the firm may cause conflicts with the community due to the fear of pollution and environmental degradation. Conclusion The success of the Morison’s is attributed to its ability to interact with the environment and attain a competitive advantage in the market. As a result the company has enjoyed a great share of the market in the production and supply of food products. The increased consciousness of the society on health lifestyles has caused the Morrison’s to adopt marketing strategies which involve promotion of the health of the society through fresh and high quality food ingredients which are sold to the consumers at cost effective prices. The firm also pursues to meet its corporate social responsibility objectives through environmental conserving practices in its production and supply of food ingredients. The interaction of the stakeholders of the firm such as the consumers, the community, suppliers, producers and the shareholders have various demands on the firm which has caused conflicts of interest. References Ahmed A., 2008, “The Marketing of Halal Meat in the United Kingdom: Supermarkets versus Local Shops”, British Fod Journal, Vol. 110, no. 7, pp. 665-670 Jones P. & Comfort D., 2006, “Health Eating and UK’s Major Food Retailers”, Vol. 108, no. 10. Needle D.,2006, “Bussiness context”, 4th Ed., thompson Learning, London Sloman J., 2008, “Economics and Business environment”, 2nd Ed., Pearson Education Limited, Harlow. Wm. Morrison’s Supermarkets Plc, 2009, “Corporate and Social Responsibility Report” Read More