Business Environment - Sainsbury - Assignment Example

Business Environment College: Name: Students ID: Date: Course Name: Unit Code: Time: Instructor: Task 1 (Sainsbury and Oxfam) Sainsbury is the leading supermarkets as well as retail-chain store operator in the UK. At present, the business operates more than 1,107 supermarkets as well as retail-chain stores. Sainsbury’s main purpose is to tender customers with safe, healthy, flavoursome and fresh food (Sainsbury 2014). Sainsbury is a public limited company (PLC) and is listed on the London Stock Exchange from where its shares are traded. Sainsbury’s main stakeholders include; Customers whose main desire is high-quality products that guarantees value for their cash. Sainsbury therefore makes constant improvements that match the customers’ needs and value for their cash. The Government is concerned with the business running sustainable operations that are not against the law or threaten the citizens’ life. It also expects to collect taxes. Sainsbury has developed a sustainable development approach to its operations. Employees who have interest in the business as it is their source of income to support their lives. They care about their job security, a safe working place, promotions and rewards. One of the key values of Sainsbury is to offer a great workplace for the over 156,000 people it employs. Suppliers who look forward to constantly supply products to the business and be paid in time. They too value their association with the business. The business has employed a supplier partnership link. Sainsbury’s ultimate desire is to become the most reliable retailer where persons find irresistible to work and shop. To make this dream true the business aims to smooth the progress of their customers’ lives and to do this their main responsibility is to tender quality products as well as services at reasonable prices (Sainsbury 2014). To help them do this the businesses strategy relies upon five key values; To be the Best for Food and Health To Source with Integrity so as to minimise impact on the environment To Respect the Environment by doing the right thing To Make a Positive Difference to the Community by supporting and helping them To be a Great Place for Work to its employees Oxfam International is among the biggest charity organisations based in the UK. Oxfam coordinates about 17 organisations within a network of 90 nations worldwide. The organisation is mainly focused on alleviating poverty. Its purpose is to facilitate the creation of permanent solutions to fight poverty. This is part of the worldwide need for change to empower citizens and craft a future that is safe, fair and liberated from poverty (Oxfam 2014). Oxfam is a charitable trust. The main stakeholders in Oxfam include; Employees who need to be in high spirits as they volunteer themselves to help fight poverty. The Government whose concern is to see citizens living conditions get better. It also expects the organisation to support the wellbeing of society. Local as well as International Communities on whom the activities of Oxfam impinge on. The communities have a great interest in the organisation. Oxfam is therefore tasked with creating a world devoid of poverty. This is where persons are able to influence decisions affecting their existence. The people should be able to enjoy their rights and freedoms and be valued and treated the same (Oxfam 2014). To fulfil this responsibility Oxfam intends to; Fight for sustainable development interventions, fair trade, education, sponsorship and campaigns as well as humanitarian assistance in tragic incidents. This is enabled through innovation and practicability. Challenge the injustice against the poor globally, regionally, nationally, locally, in communities as well as households. Oxfam links the local to the global and works together with partners at each level. Promote gender justice, transparency, public involvement, good governance, diversity and take action to against environmental along with other occurrences affecting susceptible and developing countries. Be accountable to each and every one stakeholder. They therefore are upbeat, hopeful and dedicated along with engaging and including others. In a nutshell, Sainsbury and Oxfam are both big organisations in the UK. Both organisations offer services to people with an intention to improve their living conditions and ensure their safety. However, Sainsbury is a money-making business whose motive is to make profits and operates regionally in the UK whereas Oxfam seeks for contributions from people to support the livelihood of the poor in the global society. Task 2 (BP) Resource Allocation Allocation of resources is an economic theory that analyses how economic resources are distributed at different levels. There are three key systems of resource allocation; Command System This is where the government dictates supply and price in the economy. The government settles on the commodities to be produced and their distribution. The means of production are owned by the state or collectively and different committees manage their use. The government owns the limited resources and therefore controls their economic allocation and investment (Barro & Sala-i-Martin, 1995). Market System This is where private firms/individuals make economic decisions since they control the means of production. The agile dealings of private firms/individuals in the market determine the manner in which resources are allocated as well as the production of commodities along with their distribution. Private firms/Individuals decide on how to invest their own resources and the general public chooses what to consume. There is no government interference on economic affairs of any form in a pure market economy (Barro & Sala-i-Martin, 1995). Mixed System This system put together the elements of the command and market economy. Private firms/individuals make economic decisions in the marketplace. The government is as well involved in the allocation of resources as well as the production of commodities along with their distribution. There is a somewhat equal balance between the government and private firms/individuals (Barro & Sala-i-Martin, 1995). Impact of Fiscal and Monetary Policies on BP Fiscal policy mainly affects government consumption and expenditure whereas monetary policy influences the prevailing interest rates in an economy. Both policies have a substantial effect on demand and, hence, supply in the economy. If the government opts to spend more, more money will be flowing into the economy. This means that folks incomes will go up hence their spending power will also go up. Therefore, BP will be able to sell more and produce more seeing as demand in the economy is boosted. On the other hand, once the government opts to spend less, people’s incomes and hence their spending power will also reduce. Increased government consumption can make for reduced private consumption, but not in its entirety (Barro & Sala-i-Martin, 1995). Therefore, due to reduced demand, BP will have to sell less and produce less. On the side of monetary policy, the government, through the Central Bank, can raise or reduce interest rates in the economy. If the lending rate to commercial banks is reduced, commercial banks will also reduced interest rates on loans. Therefore, people will borrow more and hence spend more. This will boost demand for BP products; the organisation will sell more and produce more. Conversely, if the lending rate is increased, commercial banks will increase interest rates on loans. People will borrow less and hence spend less (Barro & Sala-i-Martin, 1995). A decline in demand means BP will cut on production due to low demand of their products. Impact of Competition Policy and Other Regulations on BP Competition policy has existed in UK as of 1948 but has made a major impact in this new millennium given that it supports economic regulation. It has created a big change in the business environment. This is important that it affects the industry activities and hence has an impact on BP operations, particularly its organisational culture. Competition policy directly affects BP through enhanced operational efficiency. Indirect effects are felt in particular through the improvement of other policies and regulations. This promotes economic and financial development that create a good economic environment for BP operations. It also invites investment and competitiveness in the energy sector and defeat monopolistic forces hence create a uniform operating environment for BP. BP’s activities as well get enhanced through private sector development and institutional reforms such as transparency and utility regulations that translate to lower operating expenses for BP in areas like lower water and electricity expenses (Hart, 2006). Effect of Market Structures on Pricing and Output Markets can be classified in different ways, but there are basic features used to classify markets and that make it easy to make out key market structures employed to analyse decision-making as regarding pricing and output. The main features used to classify market structures are the number of firms producing a product along with the nature of product the firms produce, that is, uniform or differentiated (Jones & Evans, 2013). Therefore, there are three key types of market structures that guide organisations’ pricing and output decision making as summarised below; Market Structure No. of firms (Entry vs. Exit Freedom) Nature of Product Price Elasticity of Demand Level of Control 1. Perfect Competition Many firms Homogenous product Infinite None 2. Imperfect Competition Many firms Differentiated and are close substitutes Large Medium (a). Monopolistic Competition Many firms Each firm has a different product Large Medium (b) Pure Oligopoly Few firms Homogenous product Small Medium (c) Differentiated Oligopoly Few firms Differentiated product Small Medium 3. Monopoly One firm Unique product with no close substitutes Infinitesimal Very high Source: Author (2014). Organisational Response to Market Forces Michael Porter analysed the market forces that directly influence organisations’ profitability and repute, hence organisations have to respond to them. These include; Bargaining Power of Suppliers Suppliers are the providers of inputs required in the production process. If the bargaining power is high, suppliers exert high pressure on organisational margins which may well shrink organisations’ strategic options. Organisations can overcome this by regulating their input specifications such they are able to switch without difficulty among different suppliers (Porter, 2008). Bargaining Power of Customers Also clients are capable of exerting pressure on organisations’ margins as well as volumes. This is particularly when they order large volumes or the product is homogenous and can be substituted. Organisations can overcome this by spreading out their services such that it is hard for customers to switch to rival firms (Porter, 2008). Threat of New Entrants If an industry faces high competition, it is easier for other companies to enter if there are no barriers to entry. The new entrants may well at any time modify key determinants of the market environment (such as market prices, customer loyalty). Existing players then tend to react and transform accordingly. This threat can be dealt with by raising fixed costs and the initial outlay or by instituting patents and copyrights. A case in point is when, in 1975, Kodak tried to enter the instant camera market by selling a comparable camera to that of Polaroid. Polaroid effectively kept Kodak out of the market by simply suing for patent violation, a case it won (Porter, 2008). Threat of Substitutes This arises once there is an alternative product that is cheaper or better or the products are complementary. It is somehow similar to the threat of new entrants and could be dealt with instituting close customer relationships or tendering better value through wider product convenience. For example, soft-drink producers introduced vending machines along with convenience stores that considerably enhanced the accessibility of soft drinks compared to other beverage drinks (Porter, 2008). Competitive Rivalry between Existing Players This defines the force of competition stuck between existing players which could affect organisational margins and therefore profitability. Organisations could deal with this by price variations, differentiating their products, being innovative or making use of supplier relationships. For example, Sears set high quality standards and mandated suppliers to meet up its product requirements and price hence dominating the market from the 1950's to the 1970's (Porter, 2008). Effect of Business and Cultural Environments on BP An environment captures the setting in which an organisation conducts its operations. Culture is generally defined as a way of doing things. Organisational culture constitutes the distinctive behavioural patterns plus values that symbolise the organisation. Both the business and cultural environment guide the activities of an organisation. Cognisant of these factors, BP has developed its own values as well as principles that direct the achievement of their goal. The values underline the manner in which BP runs its operations. These environments are not constant; they change from time to time as a rejoinder to changes in the external environment along with the inner pressures of the organisation. For instance, today all over the world sustainable development is such a big issue than it was in the past two decades. There is a focus on Climate Change, through global treaties (such as the Rio Treaty (1997), and the Kyoto Treaty, among others) as well as heightened government regulation of business activities. An organisation in the energy sector, like BP, is today required to implement the Environmental Management Standards (2007). This is to emphasise on sustainable development that has got to be part of the organisation’s culture through corporate social responsibility. Task 3 Importance of International Trade on UK Business Organisations International trade involves an exchange of goods as well as services between different trading countries. International trade is helpful and it could benefit the UK through allowing local organisations to spread their competitiveness and obtain larger market shares at home and overseas. The new markets will boost the organisations’ sales revenue along with the profits generated. The organisations will as well expand their operations and open up new business divisions targeting potential clients.   Also, through tax reductions elsewhere, UK organisations are able to cut down costs and make the most out of their competitive edge. International trade helps the organisations to ease their reliance on geographical boundaries and widen their portfolio. More importantly, international trade is the best possible way in which organisations carry on their business dealings on the occasion that the domestic market is drenched. International trade stabilises seasonal variations through ensuring constant supply of materials and sale of merchandise. International trade also facilitates transfer of knowledge and technology that is crucial in enhancing UK organisations’ activities (Hart, 2006). Impact of Global Factors on UK Business Organisations Competition is a key factor that affects businesses; however there are other key factors that impinge on organisations’ activities. These are analysed through PESTLE (Political, Economic, Social, Technological, Legal and Environmental) analysis. A PESTLE analysis on UK business organisations is presented in the table below; Political factors Fear of terrorist activities International patent, copyrights and intellectual property rights Political regime change (stability) Economic factors Occurrence of financial crises Threat from the BRICS Increasing globalisation Exchange rate fluctuations Social factors Change in family values and patterns Ethical considerations Cultural change Immigration and emigration Technological factors Rapid changes in technology Development of industry-specific technology Adapting to current technologies Legal factors Increased global regulations Organisational health and safety concerns Employment and environmental laws Environmental factors Climate change Global warming Global environmental concerns Impact of EU Policies on UK Business Organisations UK is directly influenced by EU regulations since all EU member state are directly bound by EU set of laws. The biggest effect for the businesses is felt through the single market policy. The free movement of commodities is a trade stimulator. In particular, business organisations in the UK are able to focus on producing commodities that are comparatively more efficient to produce. It also expands the market size into which UK organisations put their commodities up for sale and enables them to gain from economies of scale. The EU Directive 2004/38/EC permits free movement of capital and people. This, in theory, boosts production efficiency of UK business organisations as it allows investment as well as labour to move to where there are high returns. It also has an impact on wages paid which could be beneficial to the organisations (Gardiner et al 2005). EU regulation through treaties also has an impact on UK business organisations. EU target areas of sustainable development, human rights as well as social protection have been found to impinge on businesses as well as the overall economy. The legislation that affects UK business organisations covers areas such as; Product specifications, Competition, Employment terms, Health and safety, and Consumer protection (Gardiner et al 2005). EU’s impact is as well transmitted through other policy especially agriculture through the Common Agricultural Policy which has been found to be expensive for UK. References Barro, R. J. and Sala-i-Martin, X. (1995). Economic Growth. New York: McGraw-Hill. Gardiner, B. Martin, R. and Tyler, P. (2005). Regional dimensions of Europe’s growth problem: some reflections on the Sapir Report. Journal of Regional Studies, 39(7): 979-986. Hart, M. (2006). The impact of regulation of small business performance: understanding and capturing the direct and indirect effects of regulation. Paper presented at the DTI/Better Regulation Executive (BRE) Conference on ‘Adding Up the Costs and Benefits of Regulation’, London, 24 November. Jones, P. and Evans, J. (2013). Urban Regeneration in the UK: Boom, Bust and Recovery. SAGE Publications. Sainsbury (2014). About Us. Viewed 26 March 2014, . Oxfam (2014). About Us. Viewed 26 March 2014, . Porter, M.E. (2008). The Five Forces that Shape Strategy. Harvard Business Review. Read More