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This module addresses that need and reflects the importance of students being able to recognise, categorise and explore the major elements of the business environment that impact upon organisations.

Develops the ability to think beyond the confines of the organisation

Encourages lateral thinking outside the boundaries of traditional functional disciplines or departments, and helps students to start ‘joining the dots’ between the various business modules they may be studying

a)Utilise theoretical models to evaluate global business environmental influences on organisations.

b)Identify and  discuss the key features of both the micro and macro environments of  organisations.

c)Explain the key underlying concepts in global business environment and contextualise specific issues to business sectors and organisations.

d)Conduct a PESTLE analysis on diverse sectors, e.g. public, private and charity.

e)Conduct a 5 Forces analysis on diverse sectors.

f)Identify trends and evaluate opportunities and threats for a range of organisations.

g)Express ideas in the form of a business report and academic essay

h)Collect, use and explain data from a range of sources: academic and practitioner articles comprising hard copy and electronic sources.

PEST Framework in Shaping International Business Environment

The report gives an overview of the business environment of a multinational enterprise of United Kingdom known as J Sainsbury PLC. J Sainsbury PLC has three divisions namely Sainsbury Supermarkets Ltd, Sainsbury Bank and Sainsbury Argos. The chosen sector the report is Sainsbury Supermarket Ltd (Sainsburys.co.uk 2017). Sainsbury Supermarket Ltd represents the second largest supermarket chain in United Kingdom with market share of 16.9%. John James Sainsbury found the store in 1869 in a shop in Drury Lane, London which went on to become one of the largest grocery stores by the year 1922. Sainsbury was an early adopter of self-service retailing in United Kingdom. There is a discussion on the political, economical, social and technological factors responsible for shaping the international business environment of Sainsbury. The report also put forward whether these factors are acting as opportunities or threats for the chosen company. The report also focuses on the various theoretical models like the CAGE framework, OLI paradigm and Blue Ocean Strategy for exploring the activities of Sainsbury. There is also discussion on how the company uses various strategies for undertaking operating in the economic, social, political and technological business environment. The report also discusses about the future trends with the industry in which Sainsbury operates.

Political factors of United Kingdom influenced the performance of Sainsbury in the international arena. The enhancement of corporate tax from 28% percent to 30% also proved to be advantageous for Sainsbury as it could salvage a huge amount of money due to lower enhancement of the corporation revenue.

The encouragement of the general government on the creation of job also contributed to shaping the international business for Sainsbury (Cavusgil et al. 2014). This became evident when the prime minister of UK in the year 2012 made announcements for UK Trade and Investment that provided strategic support to the retail companies. This factor proved advantageous for the multinational company as Sainsbury as it could diversify the workforce by employing staffs across its support networks and stores. As an example of Sainsbury job creation, the company has presently created 900 jobs at the new online centre for fulfillment located in east London.

There have been legislations put forward by the Food Retailing Commission that suggested implementation of Code of Practice from 5 February 2010 through consultation with ombudsman. This also contributed in shaping the international business environment for Sainsbury (Wild, Wild and Han 2014). The strict Code of Practice oversaw the price change ban and imposed a ban on retailers who are requesting payments from the suppliers. This threatened the international business environment of Sainsbury that directly affected the company access to finance. This has forced Sainsbury to undergo an adaptation in price reduction for its consumers. The aggressive strategy of price reductions has paved way of opportunities for Sainsbury for marketing their products across the global markets.  

Political Factors

The increasing cost of fuel is one of the biggest economical factors affecting Sainsbury’s business internationally. This rise in cost directly affects the Sainsbury supply chain thereby leading to an increase in price of the products.

Brexit refers to a factor that contributed to shaping the international business environment of Sainsbury. Brexit endorsed by 461 MPs directly affected political situation in United Kingdom in terms of tax, government spending and tariffs. This posed as a heightened threat towards the productivity of Sainsbury (Cumming and Zahra 2016). The former Sainsbury boss warned that Brexit would imply higher price, lesser choice and worst quality.

However, with the approval of Brexit, the British pound dropped by 17% which remained at its lowest level against the dollar since the year 2009 which influenced the most of the suppliers of Sainsbury to increase prices mostly for the household items (Rutter  and McCrae 2016). This had an influence on the international business environment of Sainsbury since the retailer had to spend more money on the imports.

Brexit also led the prevalence of potential unemployment or reduction in the work force as foreign citizens needed to obtain permit for their work for continuation in United Kingdom. This forced the foreign citizens to look for job elsewhere (de Mars et.al 2016). This represented a significant threat to Sainsbury since they had a higher percentage of foreign citizens at cheaper salaries that required immediate understaffing. Unemployment thus has an impact on Sainsbury’s international corporate environment since it not only influences the overall performance but also the marketing opportunities. This is also posing a threat to the overall profit generation of the retailer.

Various social factors influence the international business environment of Sainsbury. These are the factors that the retailer must consider when deciding to locate their businesses. One of the factors includes household disposable income (Schaltegger and Wagner, 2017). This is the income available to the individuals after the deductions of the social security charges and the taxes. Household disposable income has a direct impact on the international business environment of Sainsbury since this represents the means by which the retailer generates revenue for the customers. The present disparaging income levels for a UK citizen put forward opportunities for Sainsbury to sell their value brands to the customers instead of the luxurious items.    

The availability of substitutes at a much cheaper rate also influences the business environment of Sainsbury in the international platform. This is because the presence of substitutes has a direct impact on the products put forward by Sainsbury (Hamilton and Webster 2015). This poses as a threat to profit generation in the global market. This has also forced the retailer to revise its price so that it can be at par with the substitutes. This had affected the competitive performance of the retailer thereby invoking a marketing mix that is more volatile for conducting business.

Economic Factors

The international business environment of Sainsbury was influenced by globalization. Globalization however proved to be beneficial for multinational enterprises like Sainsbury that encouraged the company to focus on website improvement and mobile shopping apps. However, globalization described as a procedure where business and organization develops influence globally and begins operation on a global scale (Dunning 2013). The impact of globalization on Sainsbury not only helped in increasing its percentage sales but it also paved a way for the upsurge in the online orders for grocery. The efficient use of online system along with a good delivery system can prove to be profitable for the country.

The technological factors also brought about a change in the inventory management and check out system of Sainsbury (Cavusgil 2014). However, to keep at pace with other countries this retail store introduced upgraded efficient scanned checkouts and ensured computerized stock control. Scanned computerized checkouts also had fewer scopes for human errors.

Thus, technological advancements brought about by globalization thus helped in shaping the international business environment of Sainsbury by putting forward opportunities that enabled the retailer in appealing a broader foreign market.

The CAGE framework assisted in shaping the international business environments of Sainsbury. The framework helps in prioritization and identification of administrative, cultural, geographic and economic differences between the countries that the companies needs to address for development of cross border strategies (Gammeltoft, Filatotchev and Hobdari 2012). The CAGE framework helps in paying dividends while learning the patterns of trade, people and capital flow. Therefore, a constant analysis of the CAGE framework helps in shedding some light on productivity of the multinationals of the different countries thereby enabling Sainsbury to draw an inference on the countries that are experiencing prosperity economically (Herrera, 2017). Thus, the CAGE framework contributed to Sainsbury international business environment by tapping into various foreign makers and thereby expanding business.

The OLI framework also known as the eclectic paradigm put forward by Dunning. This framework is represents a synthesis of most theories related to international production. The OLI framework thus describes the extent, pattern and form of international production and centers primarily on the advantages of organization that is ownership specific and is thinking of producing products in the foreign market (Cuervo?Cazurra 2012). The organization considered here is Sainsbury. The theory thus focuses on the internationalization of the cross border markets for products and the attractions of foreign market for production.

Social Factors

The theory focused more on analyzing the decision of the retailer about ownership, location and internationalization and the advantages gained (Dunning, 2012). However, advantages resulting from the ownership remain unique for a specific firm that provides Sainsbury with the capabilities of exploiting the opportunities in a foreign land. On the other hand, advantages of internationalization refers to the gains that comes from domestic market of Sainsbury that enables the firm in remaining advantageous in the external market and also consider all the cost that comes from joining the newer market. However, finally the advantages accrued from location seem to be more accurate to the country that acts as the point of origin. In this regard, ownership advantages of Sainsbury helped the firm to become a world leader and thereby doubling the choice of products offered to the customers (Driffield, Jones and Crotty 2013). Sainsbury gained the internationalization advantages through strategic behavior of marketing that also contributed to its diversification n the international markets like the United States. Location wise the diverse and complex market of UK acted as an added advantage to Sainsbury in gaining a competitive advantage and defending its position.

The OLI framework also puts forward that businesses focusing on pursuing internationalization not only have ownership advantages but also considered competitive compared to the competitors both in the domestic and international market (Kinkel 2012). Thus, the exploitation of the ownership and competitive advantages is only possible by choosing a location of the multinational enterprise in the countries that have location advantages. Multinational firms can easily control international network due to the gained international advantages. The international advantages originate from the ability of the enterprise on appropriating the full return on the assets owned and its coordination with the usage of complementary assets. The advantages of internationalization are due to transactional failure. OLI framework focuses on valuable points of internationalization by focusing on the advantages accrued from the geographical location of enterprises focusing on internationalization. Therefore, this framework plays a vital role in shaping the International business environment of Sainsbury.  

The Blue Ocean Strategy refers to a company’s creation in an uncontested and newer market place that enables making the competitors irrelevant through the creation of new consumer value by decreasing the cost (Kim and Mauborgne 2014). This strategy applied to understand how it helps in shaping the international business environment of Sainsbury by allowing it capture newer market through cost reduction.

Technological Factors

Blue Ocean Strategy refers to the market for a particular product where there is either little or no competition (Bocken et.al 2013). The strategy therefore revolves around searching for business where there is existence of the operation of only fewer firms with no pricing pressure.

The Blue Ocean Strategy finds an application across business sectors. This strategy is however not limited to a particular business. Therefore, understanding of the Blue Ocean Strategy is important.

The present scenario in business environment is that most firms operates under extreme competition and hence tries to do everything for gaining substantial market share. Whenever the product is under the pricing pressure there always remains a possibility that their operations too might be under threat. This is the situation when business operates under saturated market, a situation defined by Red Ocean.

When there exists limited room for growth, businesses look for avenues where they can find newer business and enjoy uncontested market share, a strategy known as ‘Blue Ocean’. Thus, there is existence of Blue Ocean strategy when there is a prevalence of higher profit potential in absence of irrelevant or no competition.  

The strategy aims at capturing newer demand and making competition irrelevant through the introduction of superior product features. This helps the company in making huge profits since the product evenly priced in spite of its unique features.

However, blue ocean strategy understood from Sainsbury’s approach to introduction of of family meals with the help of its products. The cost of each meal revolved around five pounds that would be substantial enough for feeding a family of four (Hill, Jones and Schilling 2014). These meals has good portion of protein that included a range of items from basics to taste the difference for showing Sainsbury is offering value across the store and thereby maintain the required inspiration. This approach undertaken by Sainsbury will turn out to be profitable for capturing the international market since this is a unique option offered at lower prices.

The technology and retail operations go hand in hand and retailers need to navigate into the digital world that is evolving with time (Kearney 2012). This will also contribute in shaping the international business environment of Sainsbury. Customers have also become increasingly tech savvy and look for fulfillment of technical experiences no matter where they shop. Thus, there has been an increase of 15.9% of online retail sales in UK in the year 2016.

Increased number of mobile phone users nowadays carries out research, compare prices and shop online. The fact is that one out of every three consumers use Smart phones for researching about the availability of the products.  Therefore, Sainsbury must have some presence online for capturing the interest of the customers through optimization of the store in the local map so that its display is clear. The store must also make any promotions and discounts available online.

New age consumers progressively opt for various apps to look for options. Therefore, the Sainsbury must have applications for its stores for ensuring benefits to its customers. This provides the customers with an opportunity to search while on the move.  

Customers nowadays prefer to make contactless card payments since they prove to be an easier as well as quicker option. Thus, to keep up with the technologies, Sainsbury must have the availability of contactless card payments. .

In today’s scenario, social media has become a platform for getting information on various aspects. Therefore, Sainsbury must make its presence felt in various social media platforms that will help in shaping its international environment.

Sainsbury must also invest in making their websites attractive for the needs of the customers that will help in driving more traffic to the store and keeping business fresh and approachable.

Conclusion:

The report ends with a discussion on the future trends for a multinational enterprise that Sainsbury must adopt for shaping the international business environment. There is discussion on various models like blue ocean strategy, OLI framework and CAGE framework used by Sainsbury to make its presence felt in the International arena. The report also puts forward a discussion on the political, economic, social and technological factors contribute in shaping the international business environment.

References:

Bocken, N., Short, S., Rana, P. and Evans, S., 2013. A value mapping tool for sustainable business modelling. Corporate Governance, 13(5), pp.482-497.

Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.

Cuervo?Cazurra, A., 2012. Extending theory by analyzing developing country multinational companies: Solving the Goldilocks debate. Global Strategy Journal, 2(3), pp.153-167.

Cumming, D.J. and Zahra, S.A., 2016. International Business and Entrepreneurship Implications of Brexit. British Journal of Management, 27(4), pp.687-692.

de Mars, S., Murray, C.R.G., O'Donoghue, A. and Warwick, B.T., 2016. Policy Paper: Brexit, Northern Ireland and Ireland.

Driffield, N., Jones, C. and Crotty, J., 2013. International business research and risky investments, an analysis of FDI in conflict zones. International business review, 22(1), pp.140-155.

Dunning, J.H., 2012. International Production and the Multinational Enterprise (RLE International Business). Routledge.

Dunning, J.H., 2013. Multinationals, Technology & Competitiveness (RLE International Business) (Vol. 13). Routledge.

Gammeltoft, P., Filatotchev, I. and Hobdari, B., 2012. Emerging multinational companies and strategic fit: a contingency framework and future research agenda. European Management Journal, 30(3), pp.175-188.

Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University Press, USA.

Herrera, M.E.F., 2017. Contrasting the strategic role of firms in the economic development of Ecuador with that of South Korea using Ghemawat CAGE distance framework.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Kearney, C., 2012. Emerging markets research: Trends, issues and future directions. Emerging Markets Review, 13(2), pp.159-183.

Kim, W.C. and Mauborgne, R.A., 2014. Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.

Kinkel, S., 2012. Trends in production relocation and backshoring activities: Changing patterns in the course of the global economic crisis. International Journal of Operations & Production Management, 32(6), pp.696-720.

Rutter, J. and McCrae, J., 2016. Brexit: Organising Whitehall to deliver. Institute for Government, 11.

Sainsburys.co.uk. (2017). Cite a Website - Cite This For Me. [online] Available at: https://www.sainsburys.co.uk/ [Accessed 18 Dec. 2017].

Schaltegger, S. and Wagner, M. eds., 2017. Managing the business case for sustainability: The integration of social, environmental and economic performance. Routledge.

Wild, J.J., Wild, K.L. and Han, J.C., 2014. International business. Pearson Education Limited.

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