Ensuring The Properly Functioning Business Environment - Essay Example

Introduction It is important for all types of organisations to analyse their strategies as they continue with their journey to realizing their objectives. This will enable them to know if they are headed in the right path to realize their objectives and goals set. Companies face both internal and external influences as they carry out their activities. For these reasons, companies need to carry out analyses like SWOT, PEST and LE-PEST C. In this paper; the analysis that will be given much attention is the LE-PEST C analysis. It will try to identify the types of specific influences on Sainsbury Company which is one of the largest food retailer companies in the UK. It has Banks, supermarket, local supermarkets, online services and stores. LE-PEST C analysis on Sainsbury Company LE-PEST C analysis comprises of legal, environmental, political, economical, social, technological and competitive analysis. It is important to analyse the how Sainsbury Company services are being influenced by all these external features. First of all, it is guided by the need to provide the best services to its customers and to ensure that their shareholders earn high financial returns every year. Moreover, it is employee oriented as its goal is to have well rewarded employees who can have the opportunity to expand their knowledge and abilities on the activities they provide for the company. The company also aims at building a very strong relationship with its suppliers. This will definitely ensure that the needs of the customers are highly satisfied. The total number of stores owned is 301 and 455 supermarkets that serve approximately sixteen million people weekly. It has approximately 148000 employees whose work is to deliver food and other products at a very fair price (Killgren, 2007, pp.34-75). Legal factors The LE-PEST C analysis recognises the importance of the legal sector in influencing how companies operate. The legal sector can either reduce the competitive nature of a company or increase it. It lays down strict rules to ensure that the general public is safe from any substandard goods and services. The Sainsbury Company has not been left behind as the government of the UK has had a history of strengthening laws that are linked to drinks and foods. The rules target how products are packaged and labelled. Because food and drinks are very sensitive goods and they can cause a lot of destructions in an economy, then it is very important to package food using the right containers to avoid contamination. This helps in enhancing public health. Labelling laws are made to avoid counterfeit goods thus a customer can identify an original good. It also helps customers to know how the goods can be stored, handled and the expiring date. This has proven to be a very expensive strategy for the company because it means that the cost of packaging and labelling will go higher making their goods increase in price. This will definitely lead to the company losing its competitiveness (Doyle, 2002, pp.230-260). The government is in charge of setting strict bank laws to ensure that there is risk management and that money does not freely flow in the economy. This has highly affected the bank services offered by Sainsbury banks. It is has been scrutinised in how it complies with legal ways of banking and risk management. This has made its banks lose customers and it can not attract very many customers to bank with it. It spends a lot of money trying to advertise and attract customers to bank with it thus very strenuous for it (Killgren, 2007, pp.34-75). Environmental factors Preserving the environment we live in has become a global issue and it has not left out the companies as well. Companies are under pressure in putting up ways that will reduce pollution of environment and adopt production methods that will bring about environmental friendly goods. Companies need to reduce the amount of carbon released in the atmosphere. Thus Sainsbury is forced to focus on issues that are going to promote a green environment. This includes packaging goods with biodegradable packages. The biodegradable goods are very expensive thus makes the company to increase the prices of goods to ensure that they meet the cost of production. The other issue is on ethics where there have been controversial information regarding organic food stuff and animal products from treated animals. These posses a great challenge to Sainsbury because it has to provide for two kinds of consumers; those who are against such products and those who are for the products. This makes it very expensive for them in production of the same but differentiated goods. There is a call for it to balance the environmental and consumer needs at the same time (Bream, 2008, pp.120-150). Political factors Politics influences how a business will move because it holds the stability of a country. It is responsible in ensuring peace or war within a country. The fact that globalisation has become popular, it posses a great challenge to the Sainsbury company where it is in competition with forces that are highly unknown. Sainsbury is now in competition with other similar companies all over the world. Such companies have become popular in the UK and all other parts of the world. Thus it is forced to adopt strategies that will enable it to be globally competitive. This means that it has to join up with similar companies in other countries to ensure that it is recognised globally. This means that it will face very high costs in identifying the best companies and trying to merge with them. It is also a great risk of losing market because the business can collapse or people will not be able to recognise Sainsbury as a company but recognise it as being one of the branches of the company it has merged with. Sainsbury can be affected by the price fixing investigation that is going on among the UK’s big four retailers. This is because it is among the four thus has to hold its services for a while for the investigations to carry on. This will lead to loss of consumers because the allegations have contributed to a negative image of the company. On the contrary, Sainsbury is able to save huge amounts of money because the government of UK id destined to reducing corporation tax rates to 28% from 30% (Killgren, 2007, pp.34-75). Economic factors Economic factors such as the rapid increase in global prices of food have increased the cost of purchasing such goods. Thus Sainsbury Company is forced to pass the prices to its customers. It will be forced to increase the prices of the food and drinks it sells in the supermarkets and stores. Moreover, there has been a rapid rise in the cost of fuel globally. This has impacted negatively on the supply chain of Sainsbury Company as it has to raise the cost of things to counter the cost of transportation. Thus the consumers suffer the price increase of its goods. Since Sainsbury sells food and drinks, the purchasing power of consumers is likely to decrease due to the credit crunch. The customers will be very cautious as they purchase essential goods and reduce their expenditure on luxurious goods. This will be a little bit advantageous to Sainsbury because customers will still purchase the essential goods which are mostly food and drinks. On the contrary, Sainsbury bank has not gained recognition as a financial service provider in the industry thus; it has low rates of giving credits due to the credit crunch. In addition, Sainsbury is highly expected to reduce its prices because of competition in the retail sector. Many retailers have reduced prices making consumers to benefit more (Harry, 2001, pp.150-230). Social factors Social factors like culture and beliefs are likely to affect the purchase of goods and services within a community. The fact that today the culture of healthy eating is going around, Sainsbury has decided to come up with new recipes. People want easy recipes for faster cooking and they need very fresh foods, thus Sainsbury can provide these things for them very easily making it benefit from the wants and needs of its customers. Moreover, to fight the increasing rates of obesity within the country, the government is campaigning for healthy methods of eating. Thus the Sainsbury supermarkets have stocked their shelves with healthy food stuffs and drinks to promote healthy living. This culture is advantageous to its services (Killgren, 2007, pp.34-75). Technological factors There have been rapid technological changes and every company is expected to adhere to them in order to gain competitiveness. It is not easy to adopt the different technological strategies because it is very expensive. It requires training of employees and purchasing of the expensive machines. Right now internet retailing has gained recognition and Sainsbury need to consider this strategy. The internet is now the most popular advertising tool. It needs to ensure that it reaches its customers via the internet as very many people can now access the internet all day. For it to be very competitive and win more customers than its rival Tesco, it needs to consider this strategy. In addition, it has to reduce the queuing problem in its supermarkets. Like its rival Tesco, for Sainsbury to be very competitive and enable it to open all day, it needs to put up self checkout machines. This reduces the queuing problem mostly targeting the customers who purchase very few products. This will increase its sales by increasing the number of consumers (Arnold, 2007, pp.230-250). Competitive factors The retail sector is very competitive because it has very many companies that have ventured in it. Most retail companies are now including non food products, increasing the competitive nature of the retail sector. Since Sainsbury implemented its restructured programme, it has gained a 14.9% market share although Tesco is still leading in the market share. Sainsbury has a long way to go though it is doing well. In addition, Sainsbury has reaches a large number of consumers than all other supermarkets in the UK. This is a very huge competitive advantage for it. The fact that it has diversified its services, gives it a competitive advantage. It competes with other banks and building societies (Killgren, 2007, pp.34-75). LE-PEST C factors in the extract The economic factor is evident in the extract as the global financial markets have been affected by the fall in the USA share prices. The AIG insurance company is at a very big risk of collapsing and if it does very many countries will suffer because it is all over the world and it has very many investors. Given that it has a history of credit crunch which will now lead to its collapse has really affected very many people economically. This made the bank of England to pump in 50 pounds to support its banks. With this crisis, very many people are now left unemployed because companies are making losses and they have to reduce expenses thus retrenchment of some workers. Some companies are even closing down. Solutions to the problem Sainsbury is facing the global increase of food and fuel prices that is making it extend its prices to the customers. For this reason it is likely to lose customers due to the world financial crisis at the moment. It needs to ensure that it stands the test of time by incorporating some of the best technology. For instance, for its supply chain it can use the Radio Frequency Identification Device (RFID). It will allow the supermarket to have very few inventories which will make the organisation more profitable and very lean. Since it is hard for it to control the food and fuel prices, it can then make other sectors cheaper to counter other costs. This will ensure that it sells its goods at a cheaper price making it very competitive. References Arnold M., 2007. The economy: Rockier route to buy out success. Pp. 230-250. Bream R., 2008. Less power to cut emissions: LE-PEST C analysis of supermarkets. Pp.120-150. Doyle P., 2002. LE-PEST C analysis: marketing management and strategy. Pp. 230-260. Harry C., 2001. Political, economic, social and technological factors: Business skills for engineers and Technologists. Pp. 150-230. Hawkes J., 2008. The LE-PEST C analysis: Management strategies of companies. Pp.300-325. Killgren L., 2007. Sainsbury launches property venture. The analysis of restructured programmes. Pp. 34-75. Read More