Several researches in the past showed that the most important factor for the organization to survive is its surrounding environment. If an organization want to compete and progress it should interact constantly with the world outside. The environment of the organisation includes issues, trends, events and other factors which are outside the boundaries of the organization but which can influence decisions and behaviours inside the organization(A Huczynski & d buchanan2004).An organization operates in an internal and external environment. Business environment has a direct relationship with the business organization and the organization is always dependent on the environment. Unpredictibily of environment is critical to organizational effectiveness, irrespective of organization size or sector. An organisation which is 'out of fit' with its environment has to change, or go out of business. Organizations that are able to adapt quickly to new pressures and opportunities are likely to be more effective than those which are slower to respond. The organization has to compete with the environment in order to achieve your goal and objective. It is important for the organisation to conduct external analysis and as certain opportunities and threats prevalent in its external environment (job functions 2009 1).
The main focus of my course work to discuss these external environmental factors that could affect organization's present and future. The major typically trends, i.e globalization, political, economic, information technology and social demographic trends, industrial can affect just about all the organizations.
Careful monitoring of a organization external environments for detecting early signs of threat and opportunities that may affect its present and future planning(Business dictionary 2009 2).The environmental scanning helps organizations to act quickly, take advantage of the opportunities quickly before others competitors do and then can respond to the environmental threats before the serious loss.
- Macro environment
- Micro environment
Tax changes, new laws, trade barriers ,demographic change, industrial, consumer, suppliers and the government policies changes are the examples of the macro environment (Oup 2009 1).
Business in the countries from one region of the world is competing and affecting with the businesses in other regions of the world. Especially if u consider the global competition between the Europion countries and the Asian countries. Survival in new global business market calls for improved productivity and increase competition. Due to business becoming worldwide, organization in various industries have to improve their products and use technology skilfully in order to challenge the increased competition (Huczynski & D Buchanan 2004).
Technology has a great impact on the organizations. The rapid increase of technology in business helps to attain organization goals and it also helps to world much more effectively. The most significant changes seem to be in computers and telecommunication. Nowadays big businesses have opened new websites on the internet where people can buy their products from and then have it delivered in their doorstep. These factors are
- Efficiency of infrastructure
- New products.
- New products and services of competitors
- Any new technology
- Industrial productivity
Politics is directly influences the present and the future of the organizations. All businesses in the country must abide by the laws and the rules. The government of that specific country enforces and changes the rule and the laws for the good of the business and for themselves. The few political issues which effect the business are
- Consumer and law
- Local authorities
- Direct tax and indirect tax
- Employment and the law
- Stability of government
- International trade
- Political climate
- Export restrictions
According to City News AM"A new tax regime announced by chancellor Alistair Darling is sure to bring even more businesses to the Gulf state explains Jessica Mead".(J mead 2009 1)
Economic analysis is one of the most important factor in an organisation. Economical factors same like the political factors has a big impact on the organization. It could either make or break the organisation. Issues such as labour cost are vital for the organisation that want to produce the goods or services effectively and cheaply. These factors in
- Taxation charges
- Economic growth
- Exchange rates
- Stock market
- Consumer and investors
- Interest rates
- Inventory levels
According to Evening standard news "Australia today raised its interest rates for the third month in a row as the country economy leads the bounce back to recovery".(2009 Interest rates up as Aussies stage recovery 2).
- J mead 2009 City AM news 19 Nov p19
- 2009Interest rates up as Aussies stage recovery Evening standard1dec p4
People and their lifestyles can influence the businesses. Social factors can change whole infrastructure of the organizations. A major social change has been that many people are working from home today using home computers to communicate with their offices. This has led to a reduction in demand for rail transport, although many office workers commute by rail on the days when they visit their offices (for example, in London(The time100 2009 1). The structure of a population has a big effect on the organizations. These factors includes
- Income levels
- Population size and distribution
- Age distribution
- Education levels
- Ethnic origins
- Religious affiliations
- Birth rates
- Consumers activism
These factors are rating to the legal environment in which firm operates. In the recent years in the UK there have been many significant legal changes that have affected the firms behaviours. It includes
- Consumer laws
- Employment laws
- Health and safety legislation
- Laws on hiring and promotion
Oil is most important part of a country's economy. Countries that have reserves in oil have a growing economy."Oil and gas exploration and production has the potential to cause severe environmental degradation, not only to the physical environment, but also to the health, culture, and economic and social structure of local and indigenous communities"(Gas and oil 2009 2).
Oil is a valued commodity, that is why politics always play a vital part in controlling its ownership, To control and ownership of oil many wars have been fought. Lets take an example of how politics can play a cruel role in controlling the world most valued
Commodity, Middle east is the greatest area of conflict, in particular Iraq, the US attack on Iraq was due to control the oil and not for weapons despite what George W Bush and Tony Blair say. This fight is for the only reason that the Middle East supplies 38% of the world's oil, and 51% of the US's. It is expected by 2010 that Middle east will supply 48% of world oil.
Like the world oil has great impact on UK politics.UK economic environment is affected by the political decisions i.e. the proportion of GDP accounted for by the government and the distribution of income between different groups in society. The parliament enforces licensing and regulations, which govern product standards and domestic product producers. In past years the government raised the corporation tax for the oil industry to 50 per cent. This resulted in heavy criticism directed towards oil producers that the new tax, announced in the pre-Budget report, would do permanent damage to UK oil and gas reserves.
Malcolm Webb, chief executive of UK Offshore Operators Association, said he was "staggered" that the Chancellor had increased corporation tax on the oil industry to 50 per cent. He said the move would take £6.5bn out of the industry over three years and warned that it would "cost this country heavily in terms of jobs, inward investment, balance of trade, security of supply and ultimate tax revenues. It can only have a depressant effect on investment in UK oil and gas." His comments are in agreement with the economic model of the oil industry's impact on the UK economy.( Independent 2005 1).
According to the City AM news "Copenhagen will set the agenda for carbon trading. An agreement this week in Copenhagen would boost the price of co2 emissions"(J mead 2009 2).This agreement will create a huge impact and change on oil industry and companies like shell.
Introduction of Sainsbury's
Sainsbury's has started its in 1869 and since then it has gradually established itself as the third largest supermarket chain in UK. Over the past few years its parent company J Sainsbury plc has prolonged its business and now owns a whole range of other companies like Sainsbury's Supermarkets, Sainsbury's Local, Bells Stores, Jacksons Stores and JB Beaumont, Sainsbury's Online and Sainsbury's Bank.
The rising food prices because of global food crisis may have impacts on the business of Sainsbury's as it will definitely increase their purchasing and production cost (economist 2008 3). And eventually it will increase the overall price of the products in the super market. The rising cost of fuel can affect Supply chain of Sainsbury's which may results to an
- Jmead 2009 Copenhagen will set the agenda for carbon Trading CITYAM 8 DEC p16
- Economist (2008). http:// www. economist.com/displaystory.cfm?story_id=9358986 [Online]. [Accessed 08 Dec 2008]
overall increase in prices. Nowadays because of credit crunch consumers have less money to spend on the luxury products which will affect the buying power of Sainsbury 's products which results in automatically decrease profit margins for Sainsbury's. On the other hand Sainsbury's operates financial services company with HBOS (Annual Report 2007 1) and also a bank. However, both of are directed affected due to recession.
The competition in the UK grocery stores market is very tough so the other stores like ASDA, TESCO, LIDL and Somerfield are cutting their prices to give more incentives to the customers and to make more profits which results also in the decrease of the prices in Sainsbury's in order to survive in the competitive environment. The recent news of increase in VAT from 15% to 17.5% which will be implemented from January 2011 will also affect the Sainsbury 's.
Introduction to Cadbury 's
Cadbury's is the world's second largest confectionary manufacturer. Cadbury's owns some of the world best known and most popular brands such as Cadbury, Adams and Trebor basset.
The nature and size of the of the Cadbury can be influenced by the changing social customs which are very important factors. There have been significant changes in consumer lifestyles in the past few years. Now there is a increase in both male and female employment. Now more and more people eat outside and even they make shortcuts by taking ready made dishes .It suggests that the Cadbury chocolate can meet the emerging market as it does not take any time to prepare and can be eaten directly. The readily available and conviently located at the proper point of purchased food is always bought. Chocolate confectionary is highly demanding in this life style changing environment so i think Cadbury will get benefit in this aspect.
The other changes such as demographic changes can also be term as social changes. Almost 35% of the confectionary in the UK is eaten by the children and number of children in the total population is an important driver of sales. The number of children in the population will influence the volume of Cadbury's chocolate consumers. The number of people aged over 60 are more as compared to children so there is a possibility that the sale might decrease.
There are numbers of different social influences, which could affect the consumer, and in turn Cadbury's. Lets take an example that there is a change in eating habits. The past research have shown both consumers are moving towards healthier eating habits. The research shows people want a healthy breakfast cereal.
- JSainsburyplc(2007).AnnualReport2007.http://www.jsainsbury.co.uk/ar07/downloads/Sainsbury_Review_2007.pdf [Online]. [Accessed 27th Dec 2008].
Introduction to Tesco
Tesco is one of the Britain's leading food retailers and has 586 stores through out UK. Tesco is the biggest private sector employer in the UK. The company has more than 360,000 employees worldwide.
The grocery retail sector is a major user of a new technology.UK retail market is greatly influence by technology as a whole. New technology introduce on regular basses and giants in the market want to stay on the top. The increasing use of electronic data interchange, self scanning and other point-of-sale equipment has been feature of the recent innovation of the retailers. As the competition increases among the businesses, they find the new ways of gaining the level of sales. These include online service such as M&S Direct, Sainsbury's Online, Tesco Direct, and so on.
According to Sainsbury's Annual Report 2008, "Their online shopping operation has had an outstanding year. Sales grew by 43 per cent with a record Christmas performance".
"Tesco uses technology to improve fleet's green credentials" (Computing 2007 1)
"Supermarket giant Tesco has upgraded its transport management software to improve cost effectiveness and environmental performance of its delivery fleet". Technology is most of the times useful in reducing the cost for any supermarket or any particular departments. Tesco can well save their number of deliveries to its Tesco Express shops. It will also help to improve planning as well as make better use of their resources. Tesco can avail plenty of other advantages from this software. The consumer can get fresh product from the market or from the plant with he help of technology. They tend to get a better product and the durability increases for a product. Apart from such ways of increasing the level of sales, and making your operations more flexible and efficient other factors which may influence the businesses like Tesco includes government spending on research and development and speed of technology transfer, etc.
The frequency of the change in the macro environmental factors makes it even more difficult to anticipate developments that may affect an organisation in the future years. It means PEST done in January 2009 for example, will not be seen as equally accurate in mid 2009 or the year after. This is due to the everyday change in the corporate world. However there are some other factors which can bring change in the environment of organization. These factors includes internal factors, Legal, environmental, Porters five forces and swot analysis. Five forces includes supplier power, Barrier to entry, Threat of substitutes, Buying ,Degree of rivalry. While considering the pest analysis these factors also plays a vital role in any organization's survival. Porter's 5-forces can be used to analyze an industry and help shape and create a "competitive strategy"
References and bibliography
- A Huczynski & D Buchanan 2001 Organization Behaviour 4th Edition Prentice Hall.
- J Mead 2009 City AM news 19 Nov p19
- J Mead 2009 Copenhagen will set the agenda for carbon Trading City AM 8 DEC p16
- 2009 Interest rates up as Aussies stage recovery Evening standard 01 Dec p4
- Economist (2008). http:// www. economist.com/displaystory.cfm?story_id=9358986 [Online]. [Accessed 08 Dec 2008].
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