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Introduction of Understanding The Business And Economic Assignment
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The business environment surrounds all those essential factors that impact the operation of the organisation. The business environment entails the organisation to evaluate the actions and strategies of the competitor. In the study, Sainsbury has been selected to analyse the STEEPLE factors of the retailing business. In the context of Sainsbury, economic factors along with the problems experienced are illustrated in the study.
· Background of the company
Sainsbury is one of the leading retailing businesses in the UK which offers great quality and delicious foods to the customers at competitive prices. The mission of this organisation is to be the first choice for the food of the customers (Sainsburys, 2022). The vision statement of this organisation states to be one of the trusted retailers where the individual loves to shop and work.
Retail sales of Sainsbury in the UK
(Source: Statista, 2022)
In 2020, the employees of Sainsbury's were fewer in comparison to the previous year’s which is estimated at 111, 900 (Sainsburys, 2022). The revenue of Sainsbury plc in 2021 in the UK has amounted to around 28.6 billion British pounds (Sainsburys, 2022). The company has recovered from the decline in sales in 2016 and recently made a profit of around 220 million British pounds including tax.
· Structure of the retail industry
The structure of the industry in the particular area including the UK demonstrates the business environment and profit of the organisation. As opined by Shnorr (2020), the retail industry in the UK depends on organisation structure which is demonstrated as the formation that centres on mainly three respective areas. The three areas include store operations, regional operations and centralised operations.
Business index of the retail industry in the UK
(Source: Ons, 2022)
The UK retailing industry comprises almost 300000 distinct businesses which employ around 3 million people representing around 8 per cent of the UK jobs. In the UK, the earning revenue of the retailing sales is worth 439 billion pounds (Ons, 2022). The retailing industry of the UK gives the customers essential services and goods fulfilling all their aspirations and needs.
· Nature of Sainsbury in context to a retailing structure
Sainsbury is known as the PLC (public limited company) and the leading food retailer in the UK which contributes highly to the UK economy. Among the other retailers, Sainsbury has proved to be unique to its customers as it focuses on sustainability, provenance and quality.
Business model
(Source: Sainsburys, 2022)
Sainsbury completely matches the UK retailing structure which has the ability in conveying the price and quality at a time when the price is an important attribute in the retail industry (Sainsburys, 2022). The business strategy of the organisation concerning the structure of the retail industry is fully customer-centric which creates value for employees, shareholders and customers.
· STEEPLE analysis
Social factor analysis
The generation of the 21st century is reflecting the clear sociocultural trend towards healthy eating. The citizens of the country are enormously conscious of "Unhealthy junk foods". Sainsbury must consider the trend towards creating a transformation of a healthier diet which is extremely an essential one. As cited by Kim et al. (2020), the organisation is gradually transforming the business strategy with the changing trend which helps to make them stay competitive in the potential market. Other than healthy eating, people are more aware of where the food is emerging from, hence the “trade fair movement". This movement is enormously renowned in the context of chocolate and coffee but has a broad reach that impacts the products on different sides (Gong et al. 2019). The social initiatives of Sainsbury comprise giving extra prices for the drinks and food so that the farmers can provide the products at fairer prices. The social factors are immensely stable for the company which assists them to stay competitive in the long term.
Technological factor analysis
In this era of digitalisation, technology plays a significant role in different aspects of the business. “New analytics” and “online shopping” are demonstrated as the technological factors that are impacting Sainsbury. Utilising the principles of AI and big data permits organisations across the world to acknowledge more rapid operations. In the context of Sainsbury, technological advancement in analytics may be utilised to create highly accurate business models that demonstrate the pattern of selling products at maximum profits. As opined by Shnorr (2020), implementation of the method helps in the development of the profitability of Sainsbury. Apart from technological advancement, this organisation offers the options of online shopping where the customers can obtain their essentials from their comfort zone. Sainsbury has shown development with the increasing trend of technology and online shopping. It is quite interesting to show that supermarkets are trying to get the most of the growing technology.
Environmental factor analysis
In recent times, customers along with business organisations are extremely concerned about environmental factors. Every retailing organisation is trying to change their business strategy to a sustainable strategy since supermarket chains are highly liable for a large carbon footprint (Brc, 2022). Sainsbury also has a fair share of creating carbon dioxide in the atmosphere. The organisations are required to recognise the new path to be more "environment-friendly" and consider how they can reduce the environmental damage that is occurred by the operation (Cheah et al. 2018). As the concerns about the environment are rising, organisations across the country are expecting to minimise their carbon footprint. Plastic waste is the other concern that Sainsbury along with the supermarket chains highly contributes towards improved environmental impact. This organisation is trying to tackle the waste of plastic by offering incentives to the customers who purchase the loose foodstuffs and get their own bags and containers.
Political factor analysis
BREXIT uncertainties are the essential factor that impacts the operation of Sainsbury. The UK has voted to leave the European Union which could have serious consequences for Sainsbury. Like other supermarket chains, Sainsbury has faced difficulty in affording the imported products from abroad with the exit of the European Union. BREXIT has created an issue with the increase in the cost of products which has become a sure issue for UK supermarkets (Sainsburys, 2022). The organisation ensures that the customers are spending enough on the company products for maximising the profits. Sainsbury offers the most reasonable products to the customer since their business strategy is customer-centric. Other than the issue of BREXIT, there is not much political influence on the business organisation which can hamper the operation and profitability factor of the organisation.
Legal factor analysis
Sainsbury is highly accustomed to the legal laws and procedures of the UK government. The organisation ensures to avoid any kind of legal implications and issues. The organisation is required to modify the products to ignore any tax issues and save money with the new "Sugar tax" introduction. The regulations and rules are laid down causing the organisation to stop fostering its sugar, salt and high-fat foods to children below 16 years of age (Akpoviroro and Owotutu, 2018). This issue has created a certain problem for Sainsbury to do the promotion. As the organisation needs to get approval regarding the promotion factor from the legal authorities.
Ethical factor analysis
Sainsbury is highly committed to sourcing any sort of product with integrity and ethical trading. Some of the ethical issues that impact the supermarket chain include “Overconsumption of water and energy waste”, “packaging problems”, “inappropriate chemicals utilisation” and “modified products” (Vlados and Chatzinikolaou, 2019). Sainsbury's suppliers are trying to fulfil the Code of conduct for ethical trade which is dependent on the ETI (Ethical trading initiatives) base code for the sourcing of ethics. The code of conduct of Sainsbury covers mainly 12 principles including payment of a fair wage and a hygienic and safe working environment.
· Economic factor analysis
Macroeconomic factors affecting goods demand
Macroeconomic factors are referred to as a natural, influential fiscal or geopolitical event that impacts the national or regional economy. “Rising fuel costs”, “increasing salaries” and “high competition” are regarded as some of the macroeconomic factors that impact the demand for goods and services of Sainsbury and some facts of the demand of the market. As opined by Ghicajanu (2019), in recent times, the prices of fuel have maximised gradually where the probability of "environmentally minded fuel tax" and reducing fossil fuel supply causes the value to maximise significantly. This organisation employs a wide number of employees to perform simple tasks which maximises the expenses. An increase in the value of the end product minimises the volume of sales and thus profitability (Sugavaneswaran and Šarki?nait?, 2021). High competition is the most impacted part of Sainsbury's as there are several supermarkets in the UK including Tesco, Morrisons, Asda, Lidl and Waitrose.
Demand curve
From the above graphical representation, it is clearly determined that customers' demands and wants are impacted by the transfiguration of equivalent services and goods. In the context of Sainsbury, an increase in the prices of products and fuels is sought to raise the prices of services and goods of retailing organisations. Consequently, a decrease in the needs and wants of existing customers is reflected.
Determinants and factors affecting goods supply
Essential determinants of Sainsbury are found to be impacted in which cost of related goods, increase in the taxes, availability of products and maximisation in the competitor organisation are included. Supply in the services of Sainsbury is affected by the transformation of preferences of customers and beneficial services that are given by the competitor organisation (Zinecker et al. 2021). The supply of goods and services can raise effective communication strategies with customers and lower the service of the product.
Supply curve
From the above figure, it is stated that minimising the cost of retailing services is found to maximise the supply of the organisation's services. The recent transformation in this service organisation concerning price impacted the supply curve of Sainsbury.
Competitiveness of the UK market and its effect on the future business
The “world economic forum” claimed that the overall competitiveness of the UK has increased from "5.49" to "5.5 out of 7". The Retail industry is mentioned as an integral part of the business which contributes highly to the economy of the country consisting of 5.2 per cent of the GDP of the UK in 2020 and 9.3 per cent of employees of the UK in 2019 (Ons, 2022). The impact of the retailing business on the future is positive as the online retailing sales in the UK have emerged significantly faster from a 3.4 per cent share in 2007 to 27.9 per cent in 2020 (Ons, 2022). A rise in the economic structure of the retailing sector of the UK is beneficial for the organisation.
Random shocks undermining the fiscal policy of the UK government
The fiscal policies of the UK government are undermined by the random shocks that are related to certain factors of the economy. As opined by Bucko et al. (2018), many fiscal policy acts have restrained and softened the economic downturns such as tax payments, and high spending levels which are aligned to the present income. The fiscal policy of Sainsbury minimises the fluctuations in demand which significantly affected the profitability of the organisation. As a result, the economy of the UK is highly affected.
· Challenges faced by Sainsbury and the impact of a business decision on stakeholder
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Challenges
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Challenge 1
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“Connecting with the customers”
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Challenge 2
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“Connecting with the colleagues”
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Challenge 3
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“Creating a sustainable future”
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Table 1: Challenges faced by Sainsbury recently
During the period of COVID-19, connecting with the customers has become a major challenge for the organisation as most of them have shifted towards online shopping. As cited by Moult et al. (2018), although the stores were open with maintaining the social distancing factor. Increased utilisation of smart shop applications to ignore the conventional checkouts reflects the soaring online sales. Issues have occurred in connecting with customers when the decline in fashion clothing has become prevalent.
During a time of crisis, employees respect and open and clear interaction. It becomes tough for the organisation when they want to interact with the news that many do not want to hear. Considering the severity of the situation, it has been announced that no bonuses are going to be paid to the senior managers of the organisation (Managementtoday, 2022). This toughest decision is not readily accepted by everyone who creates an issue for the organisation.
The recent crisis has reflected a wide imperative of society for more liable retailing. The leaders are required to demonstrate their liabilities to the employees, suppliers, customers and wider community. Creating a sustainable future was the issue when the decision making of the organisation is connected to the stakeholders (Managementtoday, 2022). The changes in business strategy and decision have a severe impact on the internal stakeholders to continue their operations.
· Conclusion
Based on the above study, it can be concluded that Sainsbury has its stabilised external business environment which has been obtained from STEEPLE analysis. Sainsbury has experienced certain challenges recently in communicating with the customers and employees which has an impact on business operation. The economical factors are determined which have been represented by the demand and supply curve.
References
Journals
Akpoviroro, K.S. and Owotutu, S.O., 2018. Impact of external business environment on organizational performance. International Journal of Advance Research and Innovative Ideas in Education, 4(3), pp.498-505.
Bucko, J., Kakalej?ík, L. and Ferencová, M., 2018. Online shopping: Factors that affect consumer purchasing behaviour. Cogent Business & Management, 5(1), p.1535751.
Cheah, S., Ho, Y.P. and Li, S., 2018. Business model innovation for sustainable performance in retail and hospitality industries. Sustainability, 10(11), p.3952.
Ghicajanu, M., 2019. Analysis of factors from the external environment in changing business processes. In MATEC Web of Conferences (Vol. 290, p. 07008). EDP Sciences.
Gong, Y., Liu, J. and Zhu, J., 2019. When to increase firms’ sustainable operations for efficiency? A data envelopment analysis in the retailing industry. European Journal of Operational Research, 277(3), pp.1010-1026.
Kim, W., Kim, H. and Hwang, J., 2020. Sustainable growth for the self-employed in the retail industry based on customer equity, customer satisfaction, and loyalty. Journal of Retailing and Consumer Services, 53, p.101963.
Moult, J.A., Allan, S.R., Hewitt, C.N. and Berners-Lee, M., 2018. Greenhouse gas emissions of food waste disposal options for UK retailers. Food Policy, 77, pp.50-58.
Shnorr, Z., 2020. Integral assessment of retail digitalization. Economic and Social Development: Book of Proceedings, pp.33-39.
Sugavaneswaran, R. and Šarki?nait?, I., 2021. The importance of internal and external factors for the selection decision of expatriates. In 15th prof. Vladas Gronskas international scientific conference: reviewed selected papers (pp. 113-119). Vilniaus universiteto leidykla.
Vlados, C. and Chatzinikolaou, D., 2019. Methodological redirections for an evolutionary approach of the external business environment. J. Mgmt. & Sustainability, 9, p.25.
Zinecker, M., Skalicka, M., Balcerzak, A.P. and Pietrzak, M.B., 2021. Identifying the impact of external environment on business angel activity. Economic Research-Ekonomska Istraživanja, pp.1-23.
Websites
Brc, 2022, About CLIMATE ACTION ROADMAP, Available from: https://brc.org.uk/climate-roadmap/section-1-context/12-the-uk-retail-industry/ [Accessed on: 23rd April 2022]
Managementtoday, 2022, About What are Simon Roberts’ big 3 challenges at Sainsbury’s?, Available from: https://www.managementtoday.co.uk/simon-roberts-big-3-challenges-sainsburys/leadership-lessons/article/1684990 [Accessed on: 23rd April 2022]
Ons, 2022, About Economic trends in the retail sector, Great Britain: 1989 to 2021, Available from: https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/articles/economictrendsintheretailsectorgreatbritain/1989to2021 [Accessed on: 23rd April 2022]
Ons, 2022, About RSI:Value Seasonally Adjusted:All Retailers inc fuel:All Business Index, Available from: https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j5c4/drsi [Accessed on: 23rd April 2022]
Sainsburys, 2022, About Our business model, Available from: https://www.about.sainsburys.co.uk/~/media/Files/S/Sainsburys/documents/reports-and-presentations/2019/ar-docs/sainsburys-ar2019-businessmodel-strategy.pdf [Accessed on: 23rd April 2022]
Sainsburys, 2022, About Sainsbury, Available from: https://www.sainsburys.co.uk/ [Accessed on: 23rd April 2022]
Statista, 2022, About Sainsbury's retail sales in the United Kingdom (UK) 2008-2021, Available from: https://www.statista.com/statistics/386342/sainsburys-retail-sales-united-kingdom-uk/ [Accessed on: 23rd April 2022]
