The LE-PEST C Analysis of Sainsbury - Research Paper Example

Business Environment Introduction Any business organisation that needs to achieve success has to take on a serious research in all aspects that affect a business organisation. There are several pre-analysis that needs to be carried out and one such kind include PEST analysis otherwise known as the LE-PEST C analysis in the United Kingdom. These are actually acronyms for analyses of the environmental factors that might affect business operation and expansion in future. They are; L – for Legal aspects of the environment E – for Economic factor in the business environment P – for Political aspects affecting business E – for Ecological aspects of the business environment S – for Socio-cultural aspects of the environment T – for Technological aspects of business venture C – for Competitive factors of Business venture environment. What each of the factors analyzes will be discussed in detail in the subsequent text. Since business environment in the U.K is greatly changing, LE-PEST C analysis has to be carried out thoroughly and conclusions and recommendations made accordingly. The food industry in the U.K has not been spared by the world financial crises and the changing economic times, with this in mind that most businesses have to re-evaluate and do their LE-PEST C analyzes. An example of such analysis is that of the J Sainsbury plc. Business Description The commercial sector is experiencing a worst financial crisis globally and all business ventures with interests in financial sector like the J Sainsbury plc are affected by the problem. J Sainsbury plc is the topmost food retailer in the United Kingdom, consisting of a series of diversified business venture units that include; supermarkets, JB Beamount, Jacksons stores and an online Sainsbury’s business and bank. The major organisations objective is to provide customers with a variety of products and services that meet the diversified customer requirements while at the same time giving the investors good and consistent financial returns on their investments. The business diversity has been aiming at exploiting different aspects of production and different opportunities so as to develop individual capabilities that pay back in terms of business success (Rigby 2008). The company is working had to establish its policy as a tradition to meet the customer requirement bearing in mind that achieving this is of mutual benefit, plus working together with the suppliers to keep up the productions lines running and maintain their presence in the market. It is estimated that J Sainsbury plc employs over 14.8 thousand workers committed to serving their customers. The LE-PEST C Analysis The LE-PEST C is an acronym for analysis of business environmental factors under the following; L- Legal environment, E- Economic environment, P- Political environment, E- Ecological environment, S- Socio-cultural environment, T- Technological aspects, and C- Competitive environmental factors (Dickson 2008). For the J Sainsbury plc LE-PEST C analysis, it’s very critical that recommendations should be drawn based on the conclusion made in the evaluation of the environmental factors that influence business operation. The first is the Business legal aspects. Environmental Examination              /    \ External Analysis      Internal Analysis     /                     \ Macroenvironment  Microenvironment  /              LE-PEST C   analysis       The Legal Environment The British government is said to be planning a change in its financial policies that would reduce problems in liquidity of financial institutions as well as taking care of potential market abuse in the financial services industry. The law in the United Kingdom provides tough regulations on the packaging and labelling of food products. The regulations are government’s policies and that any violation to them is punishable by the law. Due to these requirements, the J Sainsbury plc company will have to endure the extra financial weight in fulfilling these regulations (Doyle 2002). Having interests in financial services, the firm is likely to be exposed to consistent legal inspection in its operations especially Sainsbury Bank. This therefore will demand that the firm will have to put more resource in meeting the legal requirements to enhance their accountability. The Economic Environment The rising global economic crisis that has led to fall in the U.S share prices is an issue of major concern. The U.S being the backbone of the world economy could bring problems to Britain as they always work together to keep up business opportunities. There are liquidity problems that need to be addressed by the government by changing the economic policies. The world food crisis is set to see food prices go higher and higher and as a consequence of higher purchasing costs by the J Sainsbury plc, the effects are most likely to be past to the customers in terms of increased prices of food products in the Sainsbury supermarkets. The world is also experiencing problems in the fuel market as the prices have kept on rising over the past few years, the continuation of such trend in the fuel prices will therefore lead to expensive chain supply and consequently transferring the cost to the consumers. The whole world is experiencing credit crunch in the management of financial sector. In Britain, the credit crunch is likely to have a double impact. The company’s financial services will be the moist hit; reduced customers’ purchasing power due to the credit crunch is likely to regulate buying with clients opting for the most essential products and services. Since Sainsbury provides these services and products (food), it’s likely to retain market share and a greater profit margin. The Sainsbury bank on the other hand will be affected greatly and may loose ability to lend money since it has not yet established a good reputation in the financial provision industry (Dickson 2008). In this world of liberalization, there are many business ventures coming up in the retail sector resulting in increased competition and this tends to bring down prices of products as many businesses are giving incentives to customers. The Political Environment The current market calls for globalization so as to increase market share of the business. Venturing in to other countries would require that Sainsbury comply with the regulations in those countries. Sainsbury is likely to fight against unknown external forces to acquire the best quality of raw materials that are profitable from sources throughout the world. An alternative would be to join other business ventures so as to explore the foreign market through amalgamations though currently it has no such intentions. The top retailers are conducting a research on the pricing of retailer products in the U.K with an intention of price fixing strategy (Killgren (2007). This would definitely have a negative outcome on the operations of Sainsbury as it’s the most suspected for this strategy. The company reputation may get tarnished as a result of these crises. The U.K government is working on a plan to reduce the corporation tax by 2%, this will have positive impact as large company’s like J Sainsbury will save a great deal of money. The Ecological Factors The green house effect of the gases that are released in to the environment has been an issue of concern and currently its not just a backburner matter any longer, most ventures with Sainsbury included are required to show that they are cutting down on greenhouse fumes they release or they should devote on green subject like bio-fuel. The environmental matter is very tricky and Sainsbury might have to struggle very hard in balancing their general opinion on environment conservation without loosing clients as a result of price increase (Taylor 2008). This is because as much as environmental conservation has to be taken seriously, there are some consumers who are price conscious and would tend not to buy when prices go up in the name of environmental conservation. The Social Cultural Environment The increased knowledge and education in the general population has dynamically changed people’s lifestyles and more so their eating habits. Emphases have shifted towards fresh and easy food preparation styles. This presents a wonderful chance for Sainsbury to introduce new recipes that encourage healthy and modest eating habits. The U.K government on the other hand is advocating for healthy eating basically because of the rising numbers of patients suffering from obesity in the country (Taylor 2008). With the trend set to last, Sainsbury could benefit a lot from this encouragement by the government and stock up healthy food stuffs and join the campaign for healthy eating and promote their products. The Technological Environment Technology has played a crucial role in most business organisation as it has made easy the marketing process and encouraged innovation and development of quality products and services. The internet has attracted online shopping and it’s estimated that the U.K alone accounts for more than a third of the revenue collected. The Sainsbury plc can use the internet to its advantage by leveraging its services so as to beat some of its competitors like TESCO who also uses online delivery system. Customers usually suffer the long queues at the check out points in Sainsbury supermarket and adoption of automatic or self check out machines would greatly solve the congestion problem just like in Tesco and Asda companies (The Economy 2007). The self check out machines can be used to operate at night hence allowing a 24/7 service at Sainsbury therefore increasing sales. The Competitive Environment The growth of the retail sector in the U.K is presenting a very competitive situation in the industry. This is because many ventures are now diversifying their operations in to non-food sector. Asda, Morrison and Tesco are the major competitors to Sainsbury in the U.K, all of them having different competitive advantages. Sainsbury has been increasing its market share steadily since its restructuring program but still lags behind its competitors with a significant margin to cover (The Economy 2007). However Sainsbury has convenient stores that make it have large consumer coverage. In the financial sector, many banks have cropped up to compete with Sainsbury bank though its not he main business of the company. The serious competition in the retail sector is that one supermarket can lap up business for others. Conclusion Sainsbury stands at a better position to gain competitive advantage having explicitly done the LE-PEST C analysis, this helps to explain the business environmental factors that face the U.K’s food brand giant and a potential financial service provider. The company can now work based on the analysis of external factor analysed in the study to find a place in the market as well as strategize on how to eliminate major competitors like Tesco. With the large product portfolio, Sainsbury can establish a growth strategy that would include eliminating threats to the business and capitalizing on every opportunity that present. References Dickson H (2008). I Need Sainsburry SWOT, PESTEL, PORTERS Analysis. Retrieved from http://www.kpmg.co/uk?industries/cm/ht.cfm#ii. Doyle P. (2002). Marketing Management and Strategy 3ed Pearson Education. Killgren L. (2007). Sainsbury Launches Property Venture.Financial Times.London Rigby E. (2008). Sainsbury Attacks Scandal of Price Inquiry.Financial Times.London. Taylor A. (2008). J Sainsbury Helps Close Gangmaster.Financial Times.London. The Economy (2007). The World in Figures.Industries.The World in 2008 Read More