Business and the Business Environment

Executive Summary
This report focuses on the business and business environment in a broader sense of Sainsburys
retailer supermarket. At first the report emphasizes the organizational structure of Sainsburys
and the interrelation of organizational functions with the organizational structures. The report
will cover the advantageous and disadvantageous side effects of the interrelationship of
organizational functions as well. After that, it will focus on the critical assessment of Sainsburys.
There prevail some macro and micro factors which directly or indirectly affect the organizational
goal attainment and its operations. It will conduct an analysis which will show Sainsburys
strengths and weaknesses and explain how these are linked with external factors like economic,
technological, social, political factors. A PESTLE and SWOT analysis will be conducted in
respect of Sainsburys in order to understand the subsequent effects of these factors and
necessary steps to be undertaken.

Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Task 1: In-depth analysis of Sainsbury............................................................................................5
1.1

Different organizational functions at Sainsburys and how they connect to the firms

objectives and structures..............................................................................................................5

1.2

Impact of Web of Interrelationship of organizational functions on the organizational

structure.......................................................................................................................................6
Task 2: Critical Assessment of Sainsburys.....................................................................................7
2.1 Impact of macro and micro factors of Sainsburys................................................................7
2.1.1 Identify some positive and negative impact of the macro-environment on the business
operations of Sainsburys.........................................................................................................7
2.1.2 Conduct an internal and external analysis to show Sainsburys strength and weakness 8
2.1.3 Explain how these strength and weakness are linked with external factor.....................9
2.1.4 Conduct a PESTLE analysis and SWOT analysis........................................................10
2.2 Reflective statement of finding of the report.......................................................................12
Conclusion.....................................................................................................................................14
Reference.......................................................................................................................................15

Introduction
Sainsburys is a retailer store which was established in 1869 by John James and his wife Mary
Ann. At present, its total market share of 16.3% and is upholding the third largest retail
supermarket chain in the UK market. It is the UKs major food retailer store and the oldest as
well. It was the market leader in retailing store business in the early 1990 but then due to some
crucial reason it lost its position to Tesco and now come to the third position in leading market
share perspective (J Sainsbury plc. 2015). Lack of innovative marketing strategy is the main
reason for this downfall of Sainsburys. Other than this, corruptive acquisition of Egypt,
alteration in management, misleading in growth prospect are also responsible for this downtown.
There work some micro and macro factors which affect the attainment of organizational
objectives of Sainsburys and decision making as well. Its corporate vision is to be the most
trusted brand in the retail market where people love to work and shop (London Evening Standard
2015).

Task 1: In-depth analysis of Sainsbury

1.1 Different organizational functions at Sainsburys and how they connect to
the firms objectives and structures
Apparently, there are various types of business organization and these are public sectors, private
sectors, voluntary sectors and legal structures. Sainsbury is a public limited company which was
established in 1869 in London. It is basically a convenience store and hypermarket or
supermarket. There are 598 supermarkets and 714 convenience stores of this Sainsbury including
161,100 number of employees. Last years net income was 166 million (Sainsburys website,
2015). Like other convenience stores, it has some definite objectives which are performed
bearing in mind during operational activities. It wants to maximize its profit in the upcoming
year as well as increasing its market share. It also avails some cost cutting steps to manage its
operating income and enhance the efficiency level throughout the organization. The primitive
functions are local convenience stores, supermarkets, SavaCentre, Sainsburys fuel, Sainsburys
caf, Sainsburys online, Sainsburys entertainment, Sainsburys business cards and Sainsburys
business direct, Sainsburys energy.
Finance plays an active role in each part of Sainsburys. Financial analysts help investor
providing clear knowledge regarding the organization and its upcoming ventures. It also manages
investor relationship. Finance functions also impact on the Sainsburys commercial function,
managing cost of Sainsburys with traders with working closely, maximizing revenue across all
product ranges. The marketing functions of Sainsburys are store fascias, nectar loyalty card,
Sainsburys active kids, brand ambassador, slogans and so on. This department directly
influences the achievement of firms objectives by developing the firms product offerings. They
are responsible for formulating Sainsburys marketing mix and for managing their brand image.
The pattern of acknowledging slogan changes over time. In 1882 it was Quality perfect, Princes
lower whereas is 1918 it was Sainsburys For Quality, Sainsburys For value. Slogans are
used to attract consumers attention and make them real buyer of Sainsburys.
There also reveals R&D department in Sainsburys which mainly focus on the research and
development program of Sainsburys in terms of product quality, marketing strategy, efficiency
growth. If R&D department does not work well, then in the long run Sainsburys will lose its
customer as it will not bring an innovative product or new marketing approach. Customer likes to
5

get a newer version of existing product and R&D department helps this function to actualize.
Logistics department mainly emphasizes on the clerical, distribution center management, driver,
transport and warehouse functions. Sainsburys cannot run its business for a single day without
the help of logistics department; this department deploys clerical, distribution, transport job
which helps Sainsburys to run its business. As it is a public limited company, it has to follow the
company act accordingly in its legal matters. Human resource department plays a vital role in the
operation of Sainsburys business. Proper employee satisfaction is very much needed to
strengthen workforce in an organization. If employees are not happy with their job, then total
output towards customer will be hampered. HR department ensures the interest of employees in
Sainsburys. These all functions such as operations, finance, marketing, R&D, logistics, legal and
compliance are performed to achieve the objectives of Sainsburys. All these functions are linked
to attaining market share increasing, effective and efficient marketing, cost cutting and profit
maximizing.

1.2 Impact of Web of Interrelationship of organizational functions on the

organizational structure
Organizations structure refers to the interlinked network of the various task and surrounding
people in charge of these tasks. It consists some activities such as task allocation, coordination
and proper supervision which are determined to attain organizational aims (Pugh, 1990). There
are different types of organizational structure; such as functional, divisional and matrix structure.
Sainsburys organizational structure is divisional as there is 6 operational division listed on the
companys website (Sainsburys website, 2016). The divisions are Sainsburys stores,
Sainsburys online, Sainsburys property, Sainsburys finance, Sainsburys energy and
Sainsburys entertainment. As Sainsburys service is provided through six divisions it follows a
divisional organizational structure within it.
There is a good impact of the interrelationship of organizations function on organizations
structure. If there is less need of interrelationship required from different functions, then a firm
should follow functional structure. In this structure, different functions are assigned to different
departments to handle and after that department manager provides a statement to a higher
authority. Each employee is allowed to focus on his own particular mission and there seems less
interrelationship required. If there needs high interrelationship in different functions throughout
6

different department then the firm should go for divisional structure. It gives an organization to
avail a chance of deploying personnel to complete all functions in each branch. Suppose if an
organization possesses different product lines and follow divisional structure within it then it will
have its own marketing, R&D, sales and accounting departments for each product. If there are
high interrelationship and teamwork needed for different functions, then a firm should follow
matrix structure within the organization. There prevails both advantages and disadvantages of the
interrelationship of organizational functions. Interrelationship allows employees of an
organization from different functions to share their skills, experience with each other which will
benefit the firm in the long run. In this respect firm wants to take employees from different
origin, ethnicity and culture. It helps the firm to create diversity in the workforce which in turn
makes an environment of skills and experience sharing a platform in the organization. One might
not gather all possible requirements at a time but if he gets a friendly work environment in the
organization he can come up with all his shortcomings and perform his utmost level best. This
interrelationship allows the firm to work well and attain its goals timely. Nevertheless, it also has
some negative sides. Decision-making speed becomes slower while adopting interrelationship
within the firm. So, a firm needs to undertake this two aspects of the interrelationship of
functions while adopting it in the organization.

Task 2: Critical Assessment of Sainsburys

2.1 Impact of macro and micro factors of Sainsburys
2.1.1 Identify some positive and negative impact of the macro-environment on the
business operations of Sainsburys
Macroeconomic factors severely impact on the operations of any organization. The factors are
usually economic, political, technological and environmental. Sainsburys business operations
are affected by these factors both positively and negatively.
Economic factors: The factors which affect the consumer purchasing power and spending
pattern in the whole economy are known as economic factors. GDP, GDP real growth rate, GNI,
Sales tax, unemployment, inflation, disposable personal income are the important criteria of
economic factors. If there prevails economic growth it positively affects Sainsburys sales level

because peoples income has risen. But the rise in inflation also causes the cost of raw materials
to increase.
Political factors: These factors affect the organizations operation mostly. It refers to the degree
of governments interference in the operation of an entity. It includes legal issues, government
rules and regulations. Globalization creates challenges as well as opportunities on the retail
market. As Sainsburys is a retail company, it can avail joint ventures or partnership and go into
the emerging market easily (Chernev, 2010). Moreover, government also has decreased corporate
tax rate from 30% to 28% which ultimately helps the retailing companies to invest surplus
money in business affairs
Technological factors: Productions growth rate increase with the help of technology. It can
speed up the degree of production in quantity and quality as well. So, technology affects the
operational running of Sainsburys. Sainsbury must have to grab the trend of technology and
quickly adapt it within the organization. Without doing it, production of that specific product will
be outdated and will miss out market opportunities. Most of the consumer do not like the
queuing system in the UK (Bracker et al. 2008) and so modification in this process through
technology has become a primary concern for the firm.
Environmental factors: A business entitys operations are affected by some environmental
factors such as natural resources. These are affected by some marketers and their marketing
activities. It is strictly maintained to be eco-friendly in dealing with an organization. Sainsburys
operations are also affected by the environmental factors.
So, it can be said that the factors of macro-environment have some positive and negative impact
on Sainsburys operations.

2.1.2 Conduct an internal and external analysis to show Sainsburys strength and
weakness
Every company has some strength and weakness with which it runs its business operation. After
undertaking some internal and external analysis, Sainsburys strength and weakness have been
found out. Sainsburys top most strength in the market is that it uses online media to take the
8

order and deliver product at consumers choice. Very few companies are adopting this access in
their operation and so Sainsburys online growth volume has become the most viable strength.
Then it covers loyal customer by giving them suitable products at their choice, by providing after
sale services, by maintaining a good customer relationship. A Loyal customer is a big strength of
an organization. Sainsburys takes much effort in the research and development of their
marketing strategy and customer relationship because this can bring loyal customer and thus
attain the organizational goal. Strong brand equity is another strength of Sainsburys. Brand
equity value can make new customer to a loyal customer. Strong brand image of a firm makes
the way to success even smoother. People are attracted to purchase the branded products even if
they are not being asked. Sainsburys has successfully established a strong brand equity value
throughout the organization regarding its product and so it is supposed to be a strength of
Sainsburys. Then after doing external analysis, it came out that Sainsburys is the first
supermarket which has introduced fairtrade. It is regarded as the strength of Sainsburys because
it grabs the market with its innovation and people are responding to that innovation through their
purchase behavior. According to a market report Sainsbury suffers from one of the highest labor
turnover rates in the retail industry of UK. Similarly, the own brand products of Sainsbury are
not that popular among customers compared to those of major competitors like Tesco, Asda etc.
Some usual customer then does not try to afford to purchase its product and as a result
Sainsburys can lose a plausible customer.

2.1.3 Explain how these strength and weakness are linked with external factor
There are some strengths and weaknesses of Sainsburys which impact it attainment of
organizational goals. These strengths and weaknesses are linked to external factors. It has been
seen that online marketing is a strength of Sainsburys and this is affected by the improvement of
technology all over the world. This external factor like technology is the prerequisite of adopting
online marketing coverage and make it viable to the consumers. Sainsburys has a loyal customer
and it is due to the social factors of the environment. Once a customer likes a product of
Sainsburys, he continues to purchase from this store and this is linked with consumer behavior.
Consumer behavior totally depends on how an organization is providing service. This all are
linked with social trends. One weakness is diminishing customer base as some of the customers
think excessive brand equity of Sainsburys and so they do not like to afford to purchase its
9

product. This can be due to changing social trends, habits of customers. If the social trend
towards purchasing of Sainsburys product changes then it can rapidly impact the growth
prospect of Sainsburys. Habits of customer also affect the purchasing choice of the customer
towards Sainsburys product. If customer does not uphold the habit of purchasing branded
product, then Sainsburys product will lose its market share as a customer do not want to avail it.
Loyal customer and strong brand equity value are regarded as the strength of Sainsburys and
this is due to external factor like economic factor. There also prevail economic factors like
increase in disposable income, GDP real growth rate, unemployment, inflation and so on. The
increase of disposable income increase the purchasing power of the consumer and thus it pushes
the customer to buy products of Sainsburys which ultimately make them a loyal customer of
Sainsburys. GDP growth rate also impacts the behavior of customer towards purchasing of a
product. When this rate increases, it means that purchasing power of customer is increasing and
it will ultimately benefit Sainsburys interest. But the increase of inflation causes the cost of
production increases which makes the price of goods even more costly. So, inflation has a
negative impact. Sainsburys is exploring a range of new opportunities because it wants to
provide new services to its customer beyond its core business. Their concern is to grow value
based customer through it and it is possible when a customer responds with their purchase
motive which is linked with an external factor like economic factor.
So, it can be concluded that the strengths and weaknesses of Sainsburys are linked with an
external factor like technology, social, economic and so on.

2.1.4 Conduct a PESTLE analysis and SWOT analysis

PESTLE and SWOT analysis will help a firm understand its business environment and its
strength and weakness in a broader sense.
PESTLE analysis:
Political factors: Sainsburys is located in the UK and thus its operation and performance are
highly affected the political factors of this country. The rate is high in terms of debts on
government and on the consumer. It impacts the attitudes of customer and business affairs
confronts great pressure as well. Despite the situation, Sainsburys has to compete in this market
surrounding (Carel, 2008).

10

Economic factors: In the time of economic recession, Sainsburys business operations are
highly affected by the increasing inflation rate and an unemployment rate which are the two most
important elements of economic factors (Wood, 2012). Higher inflation decreases the demand of
Sainsburys product and unemployment decrease the purchasing power of the consumers. In this
context, Sainsburys is supposed to develop its business horizon to new emerging markets.
Social factors: Nowadays customer does not want to go various places for various products
rather they want all products under one roof. Sainsburys has provided this opportunity to the
customers. The increase of female worker in Sainsburys workforce has resulted in diminishing
homemade meal making (Griffin, 2011). So, there has been an alteration of demand pattern in the
society.
Technological factors: There has been an increasing trend of proving online food delivery
service in Sainsburys. The annual reports of Sainsburys support that there has been a
continuous development in online food delivery. It resulted in an increase of sales by 25% yearly
(Sainsburys Annual Report, 2011).

Legislative factors: A companys performance is directly affected by the legislation and policies
taken by government (Information Age, 2004). For example, there has been introduced a new tax
on the advertisement of highly processed foods and Sainsburys has smartly adapted it by
introducing modification in its products.
Environmental factors: Organizations should have a prime motive to keep the environment
healthy and safe while performing its operation (Jones, 2008). Sainsburys act in a socially
responsible manner and proved it by presenting Reduce, Reuse, Recycle approach that is
effective in managing waste, packaging and recycling.
After going through the PESTLE analysis, it can be said that Sainsburys is affected by the
external factors like high inflation rate and high unemployment rate whereas company itself is
taking effective steps which will help it sustain its growth level.
SWOT Analysis:
11

Strength
1.Online media

Weakness
of 1.Treated

as

Opportunity
an 1. Wide market

Threat
1.Competition

marketing

expensive brand than 2. Acquisition

2. Loyal customers

that of Tesco, Asda 3. Online platform of slowdown

3.

Strong

brand etc.

equity value
4.

2.

Inventory

Diversified management

investments
5.

market

The

3.

Weak

economic

3.Lower

cost

of

competitors
4.Restricted exposure

in

first globalization

supermarket

2.Sudden

to

international

markets

to

introduce Fairtrade
6. IT infrastructure

Sainsburys diversification of individual business units minimizes companys risk and thus if
any specific business unit experience loss, other units will not be influenced by it (Bezos, 2007).
IT usage and other technological advancement make Sainsburys growth prospect higher (Sawer,
2010). Sainsburys indifference to spread its business globally calls for the additional problem in
future if economic conditions of UK turns out worse (Regoff, 2007). So, it should think of a
global business plan.

2.2 Reflective statement of finding of the report

This report summarizes some important aspect which I find very relevant in the decision making
of a firm. There has been a lot of discussion on the macro which is PESTLE factors and micro
which is SWOT factors in this report.
The macro factors especially impact the overall operation of a firm in a broader sense. Political
factors can be favorable or unfavorable in terms of any firm and this affects the decision making
of that firm. Economic factors like inflation, unemployment, are needed to be concerned while
taking a decision because alteration of any factor from the previous situation can severely affect
the decision criteria (Wood, 2012). Society is changing rapidly and in this context a firm should
12

understand the social behavior and use it for its business operation. Whether the demand pattern
is changing or not can be a good dimension of decision taking criteria. Technological
advancement can bring new opportunity for a firm and so it has to consider technological factors
in its decision taking. Every firm needs to abide by some rules and regulations of that specific
country that it belongs to. In decision making, it has to consider the legislative rules provided by
the government or otherwise their decision will not hold good (Information Age, 2004). It is
todays commitment to keeping the environment eco-friendly and every firm is concerned about
it. So, decision-making procedure is affected by the environmental factor as well. The micro
factors are also important in decision-making at a firm. The strengths and weaknesses of a firm
impact in the decision-making procedure. It will try to overcome its weaknesses and will take
decision according to the strength it upholds. A firms objectives are affected by these macro and
micro factors. Political, economic, social, technological, environmental and legislative factors of
macro environment and strength, weakness, opportunity and threat of microenvironment have
some positive and negative impact on the attainment of firms objectives. If there prevails
political turmoil, then it impedes the firms attainment of its objectives. But if there prevails
sound political atmosphere, it enables the firm to attain its objectives. In the case of economic
factors, lower inflation lessens the production cost which in turn enables the firm to make a
surplus sale and thus achieving organizational objectives. Any firm has to abide by the legislative
rules provided by the government and if they seem favorable to any firm, then the rules can be
used to attain organizational objectives but if they do not, then it impedes to the achieving of
these objectives. Some micro factors are also responsible for attainment of organizational
objectives. If a firm does not nurture its strength aspect, it will impede in achieving
organizational objectives whereas if it nurtures and makes the best use of its strength issues it can
achieve objectives. A firm should overcome its weakness by taking necessary steps. A firm
should also take threat issues very seriously or otherwise they will impede the attainment of
organizational objectives. Lastly, a firm should look forward to attaining objectives through
proper usage of opportunities in its operation.

13

Conclusion
A firm needs to understand the business environment in order to keep its operation successful
and achieve its organizational goals. Moreover, by understanding and analyzing the surrounding
business environment, a firm can acknowledge its strengths, weaknesses, opportunities and
threats. Organization needs to supervise it political, economic, social and technological factors
regularly in order to understand the business environment. Sainsburys will take necessary steps
in understanding its business environment regularly and make a strategic plan towards attaining
organizational goals in the long run.

14

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