Question:
Discuss about PEST analysis of Sainsbury, business operation of Sainsbury’s and effect of globalization on business?
Answer:
Introduction:
The report is concerned with the PEST analysis of Sainsbury’s, where the external environment of the company is analyzed. The PEST analysis is used to analyze the external factors like Political, Economic, Social and Technological factors. It also focuses on the influence of any of the three factors on the changes in the competitiveness of the organization. The competitiveness of the organization is affected by these factors, and these can affect the competitiveness positively as well as negatively. The main characteristics of the business organization are also determined, and it incorporates the customer service and pricing of the products in Sainsbury’s. These two are the main pathway to the company, with the help of which it has improved its customer service. Again, at the end of the report, the effect of globalization and its role in changing the roles and responsibility of the line managers are also discussed. In this way the entire assignment will focus on all the concerned issues.
PEST Analysis of Sainsbury:
The PEST analysis is an analytical tool that examines the external environment and the macro factors that affect the business operations of the company as a whole (Kapferer 2012). Therefore, in order to determine the appropriate strategy that Sainsbury’s should adopt in order to cope up with the current situation is determined analyzing the external environment of the company. Hence, PEST analysis will be used as the appropriate tool to audit the external environment of the company.
Political Factors:
According to Hitt et al. (2012), in the United Kingdom, the burden of debt on the government as well as on the individuals directly affects the behavior of the consumers. Due to this, the business organizations are faced with higher market pressure. Therefore, in a situation like this, Sainsbury’s should not only operate in these markets but also continue to producing and running its organization in a continuous manner.
Economic Factors:
The two main factors that have affected the business of Sainsbury’s is the high rate of inflation along with high rate of unemployment. As the prices of the food products became high and due to the excessive unemployment, there is a significant decrease in the production of the food products this has led to a decrease in the demand for the products of the company (Lim and Tsutsui 2012). Therefore, it can be recommended to the company to expand its market in the new emerging markets and developing economies.
Social Factors:
In the current era of the world moving at a fast pace, the customers, want a place where they can find all the products under one single roof. Sainsbury’s has adopted this strategy and has been benefitted a lot as they have introduced the non-food products. However, Ki et al. (2015) pointed out that due to change in the societal circumstances, that is an increase in the female in the workforce has led to a decrease in the demand for certain commodities. As there is a fall in the demand for home cooking commodities. Therefore, the demand for packaged foods has increased significantly.
Technological factors:
The online food delivery system of the Sainsbury’s is increasing at a rapidly. It is evident from the annual report of the company that, there is a sustained improvement in the online business segments of the company. People are widely accepting the online facilities provided by company; this has helped the company to raise its sales by 25% (Erez et al. 2013).
Apart from these factors, there are other factors as well; these are the legislative framework and the environmental factors. These two factors affect the performance of the company largely. The legislative framework as designed by the government of the concerned country will affect the business strategies as well as the performance of the company. According to Fan et al. (2013), the government has adapted a new policy that it will impose a tax on the fatty and highly processed food and the company is obeying the framework perfectly. Some environmental factors also have a significant effect on the company. It has implemented certain strategies to keep the environment healthy. It has adopted the strategy of reducing, reuse and recycle, which have helped the company to manage waste and recycle the products.
Business operation of Sainsbury’s
The J Sainsbury Plc. was established in 1869 and now has become one of the leading companies in the United Kingdom. It operates in more than 1200 supermarkets, online stores, and general merchandise operations as well (Martin et al. 2012). It is also involved in a joint venture with Land Securities and British Lands Company. The company provides a wide range of banking products through the Sainsbury’s Bank. It is evident that the company operates in a diversified framework almost all the sectors of business operation have been acquired by Sainsbury’s. It is a large corporation dedicated to serving the customers and their needs in order to survive the strong market competition.
Sainsbury’s is enhancing its customer experience by adapting the strategy of implementation of the customer service and setting up the price of the products efficiently (Jiang et al. 2012).
Customer Service:
The company has invested a lump sum of its capital in order to improve the customer experience. The main of the company is to provide its customer the best possible assistance while shopping. Sainsbury’s is the first company that has installed a self-service checkout in all of the supermarkets. According to Morgan (2012), this helps the customers to reduce the queuing time and provide the customers to choose how they will checkout. The company has also installed a Brand Match machine that checks prices of over 14000 branded products and compares them with Tesco and Asda in a very short time (Martin et al. 2012). This also takes part in the promotional activities, by providing vouchers that the customers can redeem during the next visit. The company has also implemented newer techniques recruitment and training its employees. Customer satisfaction and retention depend largely on the staffs’ attitude towards the customers. A well-trained and motivated workforce will always be dedicated to serving and assist the customers during the shopping activities, which will, in turn, increase the customer satisfaction. This will help the organization to retain the existing customers as well as attract potential customers to the stores (Bock et al. 2012).
Price:
Demand for any commodity depends broadly on the price of the product. If the price of the product increases, the demand will decrease and vice versa. Fugate et al. (2012) pointed out that, pricing of a product is an essential factor that determines the customer experience. Sainsbury’s has efficiently priced its products; moreover, it provides a rigorous comparison between the prices offered by it with Tesco and Asda. This helps the customers to judge the price of the product and thereby make the purchase decision. Again, Sainsbury’s has maintained the quality of its products as well; it has not compromised with the quality of its product in order to provide a lower price than that of its competitors. The company uses a technology intensive production technique that helps it to keep the rate of production at a higher rate. According to He and Brown (2013), the main objective of Sainsbury’s is to address the ever-changing needs of the customers by understanding and analyzing the needs of the customers. This will help the company to build up a proper understanding of the products and its customers as well. With the help of this knowledge, the company will be eligible to price its products in accordance with the type of the consumers and their consumption pattern.
Effect of globalization on business:
Presently in the era of globalization, the business of almost all the sectors has been affected. Broadly, the changes that are caused by globalization can be broadly divided into three categories, rise in competition, changes in the technology and transfer of information (Yucel and Bektas 2012).
It is quite evident that the level of competition will increase due to globalization. The companies compete regarding the products, prices and the service cost, target market segment, adaptation of technology, etc. According to Hogg et al. (2012), if a company is efficient to produce products at a lower cost and sell the product at a lower price, it is more likely that the company will be able to attract a significant number of customers. Sainsbury’s also adopts this strategy; it expensively uses technology to produce at a lower cost.
Again, one of the most striking features of globalization is the transfer of technology. It helps the companies to make use of the advanced and improved technologies of the foreign firms in order to gain the competitive advantage in the global market (Keupp et al. 2012). Technological factor also helps the companies to produce and maintain products with excellent quality. Therefore, it is necessary to use the most advanced and efficient technology to maintain a lower cost of production and to meet the needs of the customers. Sainsbury’s has adopted the most advanced technology among its competitors.
Exchange of information is another effect of globalization. When there is the perfect exchange of information among the companies, the companies are able to adapt to the global environment as well as the global change.
According to Langley et al. (2013), the line manager of a company is responsible for controlling and managing the human resource of the organization. As the human resource or the labor force of a company is responsible for the well-being or reputation of the company, therefore with the changing environment of business the company should change the role of the line manager accordingly. Nowadays, the line managers are focusing more on the business associate with the organization rather than concentrating on organizing the business. It has helped the line managers to maintain the sustainability of the organizations. Again, the line managers in the era of globalization are more determined to design the strategic framework that is required to maintain to retain the competitiveness of the organization rather than focusing on being an administrator (Martin et al. 2012). Thus, the role of the line managers is changing with the emergence of globalization. It has significant effects on increasing the value of the organization at the same time making the organization to move at a faster rate and become cost effective. The line managers are now more inclined towards the business related activities. For this purpose, the line managers are now more concerned about the strategic framework, team building activities and the changing the business catalysts. Therefore, it can be said that globalization has changed the nature of work and responsibilities of the line managers. They are now more concerned about the team building and motivating activities. This has also helped the managers to contribute in the business development process of the company as a whole (Keupp et al. 2012).
Conclusion and Recommendations:
To conclude it can be said the study has successfully covered all the relevant questions and the related concepts. This has helped the researcher to gain a broader insight of the concerned topic, with the help of the knowledge gained the researcher has tried to explain the relevant concepts. In the PEST analysis of the Sainsbury’s, it has been found that the company is strong enough in all the aspects. However, the researcher suggests the company to follow the political frameworks more precisely while planning for expanding its business abroad. Again, in the next section the researcher has focused on how the company has enhanced its customers experience by changing the price factor and the customer service factor. In this case, also, the company could have been performed well, by enhancing the customer’s experience. This can be done by providing the customer a one to one assistance during the online shopping. At the end of the assignment, it is seen that the effect of globalization on the line managers. As the role of the line managers has been changed because of globalization, it should be used in a positive framework. Otherwise, it may affect the organization adversely.
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