Business Environment: Analysis of Morrisons - Assignment Example

Introduction

Over the last years, supermarkets in the developed economies have acquired an increasing share of grocery markets, thus enhancing their influence over suppliers and customers. At the national level, the large share of the supermarkets is in hands of big players, such as Tesco, ASDA, Sainsbury and Morrisons. At the same time, different supermarket companies have targeted specific market segments and concentrated on the preferred format. Thus, Morrisons, a fourth largest food retailer in the UK with the market share of 11.7% (Neville, 2013), has strongholds in the north of the country. In general, across Britain, Morrisons has 475 stores and over 11 million customers’ visits each week (Making great food affordable, 2012). The company itself says that it is also the second largest fresh food manufacturer in the UK, which makes it different from the competitors. It is because Morrisons follow six priorities in its business that help it to rebuild the company and strengthen the brand. Thus, the strategic vision of Morrisons is to be more competitive which means to invest in the customers and cutting prices on its products. Moreover, the company pursues its activities through development of programmes, such as “Made by Morrisons” in order to provide the range of simpler and more competitive prices. The company follows such objective as to serve its customers better, which is possible through recruiting new employees and rescheduling its people toward the busiest times of the week. Finding local solutions is another strategic vision of the company with elements of stores’ ranging, pricing and promotions to be relevant and more efficient (Strategy, 2016).

2.1. Explain how economic systems attempt to allocate resources effectively

One of the main tasks of each government is to tackle the issue of determining what, how and for whom goods and services are produced. Hence, the problem of resource allocation is universal and can be solved through the economic system. Across Europe, government prefer using the market system to bring together producers and customers to understand the questions about resource allocation. Thus, through free market model or centrally planned model, it is possible to solve the problem of resource allocation (Myers, 2012). In Britain, the transition towards the market economy has been made in two different periods, where political rhetoric employed supported a shrinking of the state. Other words, free market was considered as the one that promoted freedom, choice and individual incentives to make profit and increase efficiency. In the UK, the interventions of government in such industries as retailing are directed as de-regulation and pursuit of the free market economy. For instance, the restrictions for opening hours were removed in 1994, resale price maintenance in the book trade was changed and stores location is managed through zoning procedures in general land use planning policy (Burt, Sparks & Teller, 2010). At the same time, policies of the government tend to switch between restrictions on the new forms of development to the encouragement of such developments. Such switching of policy on land use is driven by the debates over social and economic requirement from retailing and the degree of impact on the existing retailers and existing centers. It is partially because of the role of UK’s retail sector, which is enormous and influential.

2.2. Assess the impact of fiscal and monetary policy on business organisations and their activities

Another important aspect that influences Morrisons’ business is fiscal and monetary policy of the UK. It is because of the recent economic slowdown, which lest some ripples in the consumers spending pattern. At the same time, the government does everything possible to encourage a spending rather than a thrift economy (Nnadi, 2011). In the current time, fiscal policy affects businesses in terms of government’s availability to borrow to invest only for future needs. Monetary policy of UK is the attempt to manage and control macro-economic variables in the economy using interest rates. The impact on business of Morrisons is made through government’s use of taxation, while monetary policy affects such macro-economic variables of Morrison as employment. In addition, the decisions of the European Union and the obligation to follow EU requirements in UK law have the great impact on activities of Morrisons in terms of business to need to adopt energy efficient policies (Murray, 2001).

2.3. Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation

Linking company’s performance to the competition policy, such policy refers to the extent to which the governments encourage free market competition that also enable the government to bring more efficient allocation of resources. At the same time, government regulation, nationalisation, labour market rigidities and interference in free trade create barriers to free market competition. Basic assumptions that come from the competition policy are that it is related to positive effects on companies’ performance. Increase competition is linked to the higher levels of productivity and lower prices of the company (Thomas, 2012). Kitzmuller and Licetti (2012), state that competition policy allows markets to work effectively for the benefit of customers, thus, driving sustainable economic growth. For Morrison, that means that performing along with the other retailers promotes its growth.

3.1. Explain how market structures determine the pricing and output decisions of businesses

One of the best approaches in considering the external business environment is the PEST analysis, which stands for identifying political, economic, social and technological factors that are used to scan company’s macro-environment. To Morrisons, these factors enable the company to better analyse what affects its operations, and how it should react on change of the external environment.Following this consideration, PEST analysis helps to fit strategy between capabilities and the external environment (Gupta, 2013). Thus, the economic factors that influence Morrisons are associated with the type of market structure, which has impact on the pricing of the company. That does not mean, however, that a company is free to set own prices if one wants to maximize the profit. In perfect competition, companies such as Morrisons have no choice but to charge what the market says (Lee, 2014). Musonera and Ndagijimana (2000), state that it is the significance of the current prosperity of economic growth of the country, distribution of income and demands for goods and service that impact pricing and output decisions of the retailers products and services. The other measures of the market such as the size, growth, stability and competition are the main determinants of pricing (Almgren, 2014).

3.2. Illustrate the way in which market forces shape organisational responses using a range of examples

If to analyse the market forces that have shaped Morrisons in making deal with Amazon, one of the main determinants will be the desire of Morrisons in expanding to other locations of UK, specifically to reach more people in the Greater London are where the presence of Morrisons is limited (Anderson, 2016). Thus, the deal will help Morrisons to be more effective and credible and will enable the company to become deep-pocketed with increase market share. Among other market forces that participated in the decisions of joining power of Morrisons and Amazon, there is a new opportunity for the businesses to demonstrate their broader abilities. This is made to if not become a leader than to hold high positions among the competitors of Morrisons. At the same time, the deal opens from on Amazon’s assault of thousand million pounds as British grocery market is hammered by the price war and changing shopping habits. The deal with Morrisons is impacted by the Amazon’s participation in the UK grocery world, which is a challenge to the whole trade in time. However, to Morrisons the deal is an opportunity to recent store visit. In addition, the opportunity to expand activities of Morrisons is related to the changes of shoppers, who a decade ago were only able to purchase food from one or two supermarkets. In the modern time, huge investment have enabled companies like Morrions to broaden consumers’ choice. In addition, while competition is high and intense, retailers such as Amazon should also be prepared to invest in the lowering prices and improvement of customer service. Such conditions give an ability to predict a positive pattern for business of Morrisons and Amazon in terms of extra choice to be offered to the customers and to companies that will mean profitability and competitive advantage (Ruddick, 2015). The other important consideration is about business conditions to demand less supermarkets but more opportunities to purchase goods at lower prices. Here, the deal with Amazon will help Morrisons to achieve such goal and despite the convenience of stores, changes in the shopping habits will help to increase popularity of Morrisonss- Amazon cooperation.

3.3. Judge how the business and cultural environments shape the behaviour of a selected organization

Morrisons is also one of the most affected of the big four UK supermarkets by the persistent deflation and fragmentation in the grocery shopping with issues of expensive convenience. However, the deal with Amazon is going to bring the company back to basics in stores and will provide its customers with new opportunities from Amazon. For both companies the deal is the possibility to boost the brands, while for Morrisons it will result in the products landing in the hand of new customers and for Amazon, the deal will bring better reputation and well-known speedy delivery. At the same time, it is the great opportunity to Amazon to become a member of UK business and to the country it is the new possibility to obtained shaped business environment. It is because when it comes to being a retailers, Amazon is creating own ecosystem through services that are also the effective mechanisms for looking in customers to increase their spending with the company (Loderick, 2016).

4.1. Discuss the significance of international trade to UK business organisations

The importance of international trade to UK businesses is explained partially by the referring to the notion of competitive advantage, which creates beneficial manner between the country, which invests and the UK. Such investment is usually exchange of capital, products and services that cannot be produced locally and are also aimed at increasing the variety of choice of the customers (Dudovdskiy, 2013). The role of international trade is also big for the government of UK as it strengthens the social networks within underpin international trade, help individual businesses to reach access to the main contact networks, strengthen internationalization capabilities and provide an access to information and advice.

The international trade also facilitates beneficial cooperation amongst UK businesses and helps to overcome legal and regulatory barriers to make access to particular firms and sectors (International trade and investment, 2011). For Amazon- Morrisons deal international trade refers to the opportunities that enable both businesses to compete with other Britain’s supermarket stores and smallest local shops. While the latest quarterly results are not satisfied in Amazon, setting international relations with Morrisons is an opportunity to improve the situation. Thus, the deal is a cog in Amazon’s far wider plan to reach the new customers and earn their loyalty through new services. Here, the international trade is important to Amazon and Morrisons equally as it helps the companies to use winning strategies for long-term loyalty (Aitken, 2016).

4.2. Analyse the impact of global factors on UK business organisations

The impact of global factors on the economy of UK businesses is great as all the elements of global economy are integrated with the UK economy and this connects global developments with the economic fortunes of UK (Chowla et al, 2014). Integration into the global economy benefits UK for over two decades, however, the global influences drive the bulk of the decline in the UK. The three main channels impact the world stock, trade channel, uncertainty and financial channel. If to consider trade channel, the demand for UK exports are weak and the UK import prices are increased. The financial channel refers to tighter supply of credit and more volatile asset prices in the UK.

In terms of uncertainty channel, it plays great role in the transmission of world shocks. The market of supermarkets in UK is now experiencing a price war due to the expansion of German retailers Lidl and Aldi along with Morrisons strategic alignment with Amazon. The global fresh food market is expected to achieve USD 2000 billion by 2019 showing the impressive growth with the emerging trends such as online shopping. Here, the global factors that affect UK business also affect Amazon-Morrisons deal, which at the same time proves to be successful and offer consumers fast and reliable home delivery service (Bloomberg news, 2016).

4.3. Evaluate the impact of policies of the European Union on UK business organisations

Within and outside the European Union, the EU trade policy is one of the main important as it sets the direction for trade and investment. It also shapes the trade and investment environment that is good to customers and business unities. Thus, the role of EU trade policy is great to Morrisons deal with Amazon as it ensures and manages fair and open trade and keeps the global economy open for trade. It also promotes opening up markets with the main partner countries, in case with Amazon, it is the opening of collaboration between UK and the U.S. The EU trade policy makes sure that others participants of the business processes play by the rules through lifting barriers to the markets of its trading partners. The last and not the least task of EU trade policy is to ensure that trade is a force for sustainable development of businesses and countries (Trade, n.d.).

Since competition in the food sector and food prices in particular increased significantly after 2007, there appeared a need for competition policy to be improved in order to maintain the level of playing field in the food supply chain. For that purpose, the Commission’s competition department and the National Competition Authorities in the European Competition Network are becoming active in food markets over the last decades (Agriculture and food, n.d.). These rules apply to all food supply chain and grant specific treatment to the level of chain. Starting 2000, the landscape of retailing has evolved a combination of different factors that affect demand and supply, where consumers are more demanding in terms of food, its variety and price. In addition, modern retail is developing strongly across the EU and retailers’ private label products have become more successful. The competition policy refers to Morrison and Amazon deal in terms of seeking and seizing new opportunities to lower prices and new consumers, availability to open new stores and obtain increased market share and ability to promote brands.