Unit 1 Learning Aim C and D
,Unit 1 Learning Aim C and D
,Unit 1 Learning Aim C and D
,Unit 1 Learning Aim C and D
Contents
Background............................................................................................................................................5
Evaluate the extent to which the business environment affects Sainsbury’s........................................6
PESTLE...................................................................................................................................................6
Political..............................................................................................................................................6
Brexit.............................................................................................................................................6
Tariffs.............................................................................................................................................6
Economic...........................................................................................................................................7
Interest rates.................................................................................................................................7
Employment..................................................................................................................................7
Inflation.........................................................................................................................................7
Social..................................................................................................................................................8
Obesity...........................................................................................................................................8
Ageing population..........................................................................................................................8
Technological.....................................................................................................................................8
Self-checkouts................................................................................................................................8
Online shopping.............................................................................................................................9
Broadband.....................................................................................................................................9
Legal...................................................................................................................................................9
UK laws affecting businesses.............................................................................................................9
The National Living Wage..............................................................................................................9
Corporation Tax.............................................................................................................................9
Health and Safety at Work Act 1974............................................................................................10
Environmental.................................................................................................................................10
Living healthier lives....................................................................................................................10
Sourcing with integrity.................................................................................................................10
Respect for our environment.......................................................................................................10
A great place to work...................................................................................................................10
Live well for less...........................................................................................................................10
Fair-trade.....................................................................................................................................10
Corporate culture................................................................................................................................11
CSR.......................................................................................................................................................11
Competitor activity..............................................................................................................................12
SWOT analysis......................................................................................................................................12
Strengths.........................................................................................................................................12
,Unit 1 Learning Aim C and D
Weaknesses.....................................................................................................................................13
Opportunities...................................................................................................................................13
Threats.............................................................................................................................................13
How the market structure affects pricing and output decisions..........................................................13
Changes in the grocery market............................................................................................................14
How Sainsbury’s has responded to changes in the grocery market in the past...............................14
The recession...............................................................................................................................14
Online grocery shopping..............................................................................................................15
Convenience shopping.................................................................................................................15
How the business may react to future changes...................................................................................15
Conclusion...........................................................................................................................................16
The effects of the environment on a business
As part of my coursework for learning aims C and D, I have been
asked to write a report about a large business that trades within
the EU. I have chosen to investigate Sainsbury’s which is a wide
scale business that operates in the UK but trades within the EU.
In my written report I will examine these two things, the
environment in which Sainsbury’s operates in, as well as looking
at how Sainsbury’s has reacted to change in the market in the
past and how they may react in the future.
Background
The business which I have chosen to study is Sainsbury’s. I chose to do my report and research on
this business because I found the relevant information very accessible and in addition I found that
there is a lot of information out there about the grocer which would support me in completing this
assignment.
Sainsbury’s was founded in 1869 by John James Sainsbury’s, 148 years later the supermarket has
grown tremendously since its opening. It was originally set up by the Sainsbury’s family and set up
with the objectives of selling fresh produce and trying to resolve the issue of low quality goods such
as stale food due to the lack of refrigeration in those days. To try and resolve this problem, the
Sainsbury’s family sourced fresh cow’s milk and insisted that their suppliers placed the date of the
product being made on butter. This innovative idea from the family gained Sainsbury’s loyal
customers who liked the affordable prices and the high quality of Sainsbury’s products. From then
on, Sainsbury’s began opening new stores and expanding their product portfolio. It is well known for
groceries and operates the in the supermarket sector.
In 1992 it was the greatest grocery retailer however in 1995, Tesco became market leader. Its
competitors include Tesco’s, Asda, Morrison’s, Aldi and Lidl, its biggest competitor being Tesco
(Appendix 2). Currently, Sainsbury’s takes the place as the second grocer with the largest market
share. In January 2017 they had a market share of 28.1% (Appendix 1).
,Unit 1 Learning Aim C and D
Evaluate the extent to which the business environment
affects Sainsbury’s
The business environment affects Sainsbury’s to a great extent and I will undertake a variety of
situational analysis techniques to demonstrate this, including PESTLE analysis and SWOT analysis.
PESTLE
PESTLE is a mnemonic which is a tool used by businesses to assess the environment that they are
operating in or it could also be used to launch a new idea such as a product or service. Each letter
stands for Political, Economic, Social, Technological, Legal and Environment.
Political
Brexit
Sainsbury’s is a business that trades within the EU, however current political affairs could have a
negative impact on the grocer. On Thursday the 23 rd of June in the UK, citizens went out to vote on
the EU membership referendum, which decided whether the UK would stay or leave the EU. The
results revealed that the UK voted to leave with 51.9% “Brexiteers” against 49.1% “Remainers”. This
vote has great impacts on the UK as a whole. Brexit involves leaving the EU completely however
talks have to take place to determine a deal between the EU and the UK. The talks begun on the 19 th
Of June, these talks will discuss a vast number of topics, the main ones being free movement of
people and the single market. Brexit has an impact on businesses such as Sainsbury’s because it has
caused a lot of negative effects. For example, a drop in the value of the pound, low interest rates as
well as political unrest.
Another political factor which could affect Sainsbury’s is the recent election which took place on
June the 8TH 2017. This election was called earlier than the expected date which would have been
2020 but Theresa May, the prime minister, wanted to gain a large majority of conservatives in
parliament in order to have the overriding call on Brexit talks without having the minority parties
such as Labour, Green Party and the SNP, stopping her from carrying out a “hard” Brexit.
Unfortunately, her idea did not go to plan and she did not gain a majority, however she did get the
most amount of seats. Currently, there is a hung parliament resulting in the Conservative Party
having to join up with another party, known as a coalition, this party is said to be the DUP. However,
controversy follows the DUP as they have ideologies which many people do not agree with such as
being against gay rights.
Tariffs
These all have impacts on Sainsbury’s for example, Brexit involves leaving the EU, and the EU
provides all countries within the union, free trade, however leaving the EU could mean businesses
will have difficulty trading as they will not have access to the single market. This means that there
may be tariffs that will have to be paid in order to trade within the EU. As the UK is leaving the EU,
the tariffs may be high meaning that Sainsbury’s will incur more costs, which could reduce their
revenue and profits. If tariffs were high, then Sainsbury’s would have to increase prices of products
to reduce their costs, perhaps by changing suppliers to have cheaper products. Of course, these have
negative impacts as discount retailers are on the rise, Aldi and Lidl are supermarkets known for their
cheap but good quality products. If Sainsbury’s increased their prices, this could result in customers
shopping elsewhere such as in Lidl or Aldi. This would have a detrimental impact on Sainsbury’s
profits and revenue.
,Unit 1 Learning Aim C and D
In addition, Sainsbury’s would lose some of its market share which is currently at 16.5 % (Appendix
2). It would also mean discount retailers would gain market share, currently Aldi has 6.2% market
share whereas Lidl has 4.5 % (Appendix 2). The drop in the pound would result in the pound having
less value, meaning consumers can buy fewer products with their money, as they have less value for
money, this would result in them going elsewhere. However, the effects are not only on the
consumers but on the business itself, a drop in the pound would result in Sainsbury’s being able to
buy less product for their money, therefore having to spend more money on raw materials.
Economic
Interest rates
Brexit has had a knock-on effect on the UK economy such as influencing interest rates. Since Brexit
the value of the pound has slumped resulting in Mark Carney, the Bank of England governor
declaring that the interest rate would be 0.25%. This is very low; it has its advantages and
disadvantages. The disadvantages mainly affect consumers and not businesses such as Sainsbury’s.
The advantages of the 0.25% interest rate for Sainsbury’s is that firstly, borrowing money is cheaper
for them. So for instance if they wanted to take out a bank loan , the interest on top of the loan
would be very low, making it more advantageous and much more of an incentive for businesses like
Sainsbury’s to borrow money.
The second advantage is that lower interest rates are an incentive for spending. Interest rate is
defined as the reward for saving and the cost of borrowing. People are less likely to save their
money in a savings account as the reward; the interest on top of their savings would be very
minuscule. Therefore, consumers are more likely to spend; these are advantageous for Sainsbury’s
because consumers will go to the store and spend, perhaps even buying more expensive products
such as luxury items. Again this is beneficial because Sainsbury’s will generate more revenue,
contributing to their products.
Employment
Another economic effect is employment. Employment can have a great impact on a business. For
example, if employment rates are low this can have both a negative and positive effect on a business
like Sainsbury’s. The positive affect would be that Sainsbury’s could take advantage of it by
increasing their amount of employees. This in the long run will improve productivity and increase
revenues and profits. The negative effect would be that because many people will be out of work,
they will not have a regular income therefore they would have less money to spend at Sainsbury’s
reducing the business’s profits. Currently, there are 31.95 million people in work in the UK, as of
February to April 2017. In addition, the employment rate was 74.8%, the highest since 1971; this is
great for Sainsbury’s as more people will be receiving a regular income, meaning they will have more
disposable income to spend at Sainsbury’s.
Inflation
Another economic factor is inflation; inflation is a general increase in the cost of prices. The current
inflation rate is at 2.9%, this is due to the results of the EU referendum. As the UK voted to leave the
EU, this then caused a sharp drop in the pounds value, which then increased the costs of imported
goods from abroad, such as from the EU itself. As Sainsbury’s is a business that trades within the EU,
the effect of inflation has a negative impact. This is because an increase in prices will mean that
stock from suppliers will also increase in price, this will mean that Sainsbury’s costs will go up, to
counterbalance this Sainsbury’s would have to push up their prices. This will have a detrimental
effect on Sainsbury’s since consumers do not like to spend lots of money, so if Sainsbury’s has high
prices on their products, consumers will spend elsewhere, where prices are lower. The effect of this
,Unit 1 Learning Aim C and D
on Sainsbury’s is that they could lose loyal customers and see a reduction is their revenues and
profits. This could see Sainsbury’s discount competitors Aldi and Lidl stealing some of their
customers and their market share, Aldi sales have increased to 18.1% recently and the supermarket
is gaining market share quickly.
Social
Obesity
Obesity is defined as having an abnormal or excessive amount of fat that can possibly impair
a person’s health. Currently worldwide, there are reportedly over 1.9 billion adults who are
classified as being overweight. Shockingly, obesity rates in the United Kingdom are the
highest in Europe, which is extremely concerning. Figures from the Birmingham University
show that 20% of the population are obese. These both affect Sainsbury’s. Due to the fact
that there are a large amount of obese people in the UK and the EU, Sainsbury does sell
more sugary foods and drinks as well as junk food e.g. Fizzy drinks, sweets and crisps. This is
beneficial for the grocer because an increase in sales results in increased sales revenue and
in turn profits. However, as obesity is such a growing issue, protocols are taking place to try
and combat obesity. Due to this, supermarkets may see a decline in the sales of sugary
foods and an increase in sales of healthier options. For Sainsbury’s this could mean that they
may have to start to stock healthier brands and products for example, Weight Watchers.
In recent years, supermarkets including Sainsbury’s have started to change the way they
place their products. Previously, supermarkets would place sugary or unhealthy products
near checkouts and tills, as a consumer will be more likely to quickly grab one or some of
those products on their way out of the shop. This technique is called placement and is a
technique used by supermarkets which has proven to be very powerful. Another use of this
technique was to place unhealthy products at low height levels to attract children. However,
now supermarkets are being encouraged to change their strategy and place healthier
options near the tills and checkouts such as fruit and nuts. In my local Sainsbury’s, I have
noticed that when I am queuing up to checkout, there is an array of fruits including bananas
and apples, as well as water rather than sweets, crisps and energy drinks.
Ageing population
An ageing population is what we currently have in the UK and across Europe. It essentially
means we are living longer; this is largely due to more people being more active and
healthier. The effect of this is that there are more elderly people who will have pensions; a
state pension and the other perhaps a private pension of their own, which they have paid
into over a period of time. This means they will have more disposable income which could
result in them spending more money, for example on groceries in supermarkets such as
Sainsbury’s. This of course is a good thing, as it would mean an increase in sales.
Technological
Self-checkouts
The introduction of self-checkouts where customers scan and pay for their items using a machine,
means that Sainsbury’s cuts its operating costs as they will need less staff who would usually operate
the tills. This is beneficial as Sainsbury’s saves money which can go towards further invest in the
, Unit 1 Learning Aim C and D
business. It also makes the business more proficient and productive, generating more revenue in the
long term.
Online shopping
Since the introduction of the internet, online shopping has taken off; many people are now ditching
physicals stores and are now ordering online from the comfort of their own home. For example,
many people are ordering their groceries online; so many retailers now offer home delivery.
However, this means less people will be going into physical Sainsbury’s stores, in addition, there are
many comparison websites, one of the most popular being “Mysupermakret.com” which is a
comparison website which allows consumers to look for their favourite products and compare the
prices to find a cheaper price. This will have an impact on Sainsbury’s because if a competitor has a
cheaper price, they will lose customers, meaning they will have to lower their prices to attract
customers.
Broadband
In addition, the introduction of broadband, Wi-Fi and developments such as Skype allows Sainsbury’s
to communicate and interact without physically travelling, which is very cost-efficient, it also makes
the business easier to manage because the grocer can communicate with other departments
worldwide which makes them more collaborative.
Legal
Legislation is defined as the process of making or enacting laws, the way a business can operate is
controlled by legislation. Laws are introduced by the UK government or the EU, however since the
UK is planning to leave the EU, this is an issue. One of the main aims of Brexit is to leave the EU so
the UK feels as if the EU has imposed too many laws on us. So one reason why the UK voted to leave
is to gain their sovereignty back. There are many laws affecting UK businesses which I will explain in
detail below and I will also give example of EU laws as Sainsbury’s is a business that trades within the
EU. If Sainsbury’s or any businesses does not comply with these laws they can be faced with
prosecution or fines.
UK laws affecting businesses
The National Living Wage
The national living wage for employees aged 25 and above will be £7.20 per hour, this will affect
Sainsbury’s because they will incur extra costs, which means their profits will reduce. In order to
counter balance this Sainsbury’s may have to increase the prices of their products. This isn’t
beneficial as it will have negative effects such as consumers going elsewhere to competitors with
cheaper products i.e. Aldi and Lidl. Since Brexit, prices have already increased due to inflation, so
increasing them even more would mean the grocer would lose out on customers. The increase in
pay will have a large impact on Sainsbury’s as they have over 150,000 employees, this means that
they have to pay a large amount more to their employees as they have such a large amount.
Corporation Tax
Corporation tax is defined as a tax deducted from company profits which the majority of companies
have to pay, it goes to the government. Over the years, corporation tax has varied slightly. For
profits over £300,000 which applies to large businesses such as Sainsbury’s the corporation rates
were as followed. In April 2015, the tax was 21%, April 2015, it was 20% and the same in April 2016.
However, in April 2017 this has reduced by 1% to 19%, the reason for this is because the government
uses this as an incentive to encourage businesses to open and trade in the UK. This will have a
,Unit 1 Learning Aim C and D
,Unit 1 Learning Aim C and D
,Unit 1 Learning Aim C and D
Contents
Background............................................................................................................................................5
Evaluate the extent to which the business environment affects Sainsbury’s........................................6
PESTLE...................................................................................................................................................6
Political..............................................................................................................................................6
Brexit.............................................................................................................................................6
Tariffs.............................................................................................................................................6
Economic...........................................................................................................................................7
Interest rates.................................................................................................................................7
Employment..................................................................................................................................7
Inflation.........................................................................................................................................7
Social..................................................................................................................................................8
Obesity...........................................................................................................................................8
Ageing population..........................................................................................................................8
Technological.....................................................................................................................................8
Self-checkouts................................................................................................................................8
Online shopping.............................................................................................................................9
Broadband.....................................................................................................................................9
Legal...................................................................................................................................................9
UK laws affecting businesses.............................................................................................................9
The National Living Wage..............................................................................................................9
Corporation Tax.............................................................................................................................9
Health and Safety at Work Act 1974............................................................................................10
Environmental.................................................................................................................................10
Living healthier lives....................................................................................................................10
Sourcing with integrity.................................................................................................................10
Respect for our environment.......................................................................................................10
A great place to work...................................................................................................................10
Live well for less...........................................................................................................................10
Fair-trade.....................................................................................................................................10
Corporate culture................................................................................................................................11
CSR.......................................................................................................................................................11
Competitor activity..............................................................................................................................12
SWOT analysis......................................................................................................................................12
Strengths.........................................................................................................................................12
,Unit 1 Learning Aim C and D
Weaknesses.....................................................................................................................................13
Opportunities...................................................................................................................................13
Threats.............................................................................................................................................13
How the market structure affects pricing and output decisions..........................................................13
Changes in the grocery market............................................................................................................14
How Sainsbury’s has responded to changes in the grocery market in the past...............................14
The recession...............................................................................................................................14
Online grocery shopping..............................................................................................................15
Convenience shopping.................................................................................................................15
How the business may react to future changes...................................................................................15
Conclusion...........................................................................................................................................16
The effects of the environment on a business
As part of my coursework for learning aims C and D, I have been
asked to write a report about a large business that trades within
the EU. I have chosen to investigate Sainsbury’s which is a wide
scale business that operates in the UK but trades within the EU.
In my written report I will examine these two things, the
environment in which Sainsbury’s operates in, as well as looking
at how Sainsbury’s has reacted to change in the market in the
past and how they may react in the future.
Background
The business which I have chosen to study is Sainsbury’s. I chose to do my report and research on
this business because I found the relevant information very accessible and in addition I found that
there is a lot of information out there about the grocer which would support me in completing this
assignment.
Sainsbury’s was founded in 1869 by John James Sainsbury’s, 148 years later the supermarket has
grown tremendously since its opening. It was originally set up by the Sainsbury’s family and set up
with the objectives of selling fresh produce and trying to resolve the issue of low quality goods such
as stale food due to the lack of refrigeration in those days. To try and resolve this problem, the
Sainsbury’s family sourced fresh cow’s milk and insisted that their suppliers placed the date of the
product being made on butter. This innovative idea from the family gained Sainsbury’s loyal
customers who liked the affordable prices and the high quality of Sainsbury’s products. From then
on, Sainsbury’s began opening new stores and expanding their product portfolio. It is well known for
groceries and operates the in the supermarket sector.
In 1992 it was the greatest grocery retailer however in 1995, Tesco became market leader. Its
competitors include Tesco’s, Asda, Morrison’s, Aldi and Lidl, its biggest competitor being Tesco
(Appendix 2). Currently, Sainsbury’s takes the place as the second grocer with the largest market
share. In January 2017 they had a market share of 28.1% (Appendix 1).
,Unit 1 Learning Aim C and D
Evaluate the extent to which the business environment
affects Sainsbury’s
The business environment affects Sainsbury’s to a great extent and I will undertake a variety of
situational analysis techniques to demonstrate this, including PESTLE analysis and SWOT analysis.
PESTLE
PESTLE is a mnemonic which is a tool used by businesses to assess the environment that they are
operating in or it could also be used to launch a new idea such as a product or service. Each letter
stands for Political, Economic, Social, Technological, Legal and Environment.
Political
Brexit
Sainsbury’s is a business that trades within the EU, however current political affairs could have a
negative impact on the grocer. On Thursday the 23 rd of June in the UK, citizens went out to vote on
the EU membership referendum, which decided whether the UK would stay or leave the EU. The
results revealed that the UK voted to leave with 51.9% “Brexiteers” against 49.1% “Remainers”. This
vote has great impacts on the UK as a whole. Brexit involves leaving the EU completely however
talks have to take place to determine a deal between the EU and the UK. The talks begun on the 19 th
Of June, these talks will discuss a vast number of topics, the main ones being free movement of
people and the single market. Brexit has an impact on businesses such as Sainsbury’s because it has
caused a lot of negative effects. For example, a drop in the value of the pound, low interest rates as
well as political unrest.
Another political factor which could affect Sainsbury’s is the recent election which took place on
June the 8TH 2017. This election was called earlier than the expected date which would have been
2020 but Theresa May, the prime minister, wanted to gain a large majority of conservatives in
parliament in order to have the overriding call on Brexit talks without having the minority parties
such as Labour, Green Party and the SNP, stopping her from carrying out a “hard” Brexit.
Unfortunately, her idea did not go to plan and she did not gain a majority, however she did get the
most amount of seats. Currently, there is a hung parliament resulting in the Conservative Party
having to join up with another party, known as a coalition, this party is said to be the DUP. However,
controversy follows the DUP as they have ideologies which many people do not agree with such as
being against gay rights.
Tariffs
These all have impacts on Sainsbury’s for example, Brexit involves leaving the EU, and the EU
provides all countries within the union, free trade, however leaving the EU could mean businesses
will have difficulty trading as they will not have access to the single market. This means that there
may be tariffs that will have to be paid in order to trade within the EU. As the UK is leaving the EU,
the tariffs may be high meaning that Sainsbury’s will incur more costs, which could reduce their
revenue and profits. If tariffs were high, then Sainsbury’s would have to increase prices of products
to reduce their costs, perhaps by changing suppliers to have cheaper products. Of course, these have
negative impacts as discount retailers are on the rise, Aldi and Lidl are supermarkets known for their
cheap but good quality products. If Sainsbury’s increased their prices, this could result in customers
shopping elsewhere such as in Lidl or Aldi. This would have a detrimental impact on Sainsbury’s
profits and revenue.
,Unit 1 Learning Aim C and D
In addition, Sainsbury’s would lose some of its market share which is currently at 16.5 % (Appendix
2). It would also mean discount retailers would gain market share, currently Aldi has 6.2% market
share whereas Lidl has 4.5 % (Appendix 2). The drop in the pound would result in the pound having
less value, meaning consumers can buy fewer products with their money, as they have less value for
money, this would result in them going elsewhere. However, the effects are not only on the
consumers but on the business itself, a drop in the pound would result in Sainsbury’s being able to
buy less product for their money, therefore having to spend more money on raw materials.
Economic
Interest rates
Brexit has had a knock-on effect on the UK economy such as influencing interest rates. Since Brexit
the value of the pound has slumped resulting in Mark Carney, the Bank of England governor
declaring that the interest rate would be 0.25%. This is very low; it has its advantages and
disadvantages. The disadvantages mainly affect consumers and not businesses such as Sainsbury’s.
The advantages of the 0.25% interest rate for Sainsbury’s is that firstly, borrowing money is cheaper
for them. So for instance if they wanted to take out a bank loan , the interest on top of the loan
would be very low, making it more advantageous and much more of an incentive for businesses like
Sainsbury’s to borrow money.
The second advantage is that lower interest rates are an incentive for spending. Interest rate is
defined as the reward for saving and the cost of borrowing. People are less likely to save their
money in a savings account as the reward; the interest on top of their savings would be very
minuscule. Therefore, consumers are more likely to spend; these are advantageous for Sainsbury’s
because consumers will go to the store and spend, perhaps even buying more expensive products
such as luxury items. Again this is beneficial because Sainsbury’s will generate more revenue,
contributing to their products.
Employment
Another economic effect is employment. Employment can have a great impact on a business. For
example, if employment rates are low this can have both a negative and positive effect on a business
like Sainsbury’s. The positive affect would be that Sainsbury’s could take advantage of it by
increasing their amount of employees. This in the long run will improve productivity and increase
revenues and profits. The negative effect would be that because many people will be out of work,
they will not have a regular income therefore they would have less money to spend at Sainsbury’s
reducing the business’s profits. Currently, there are 31.95 million people in work in the UK, as of
February to April 2017. In addition, the employment rate was 74.8%, the highest since 1971; this is
great for Sainsbury’s as more people will be receiving a regular income, meaning they will have more
disposable income to spend at Sainsbury’s.
Inflation
Another economic factor is inflation; inflation is a general increase in the cost of prices. The current
inflation rate is at 2.9%, this is due to the results of the EU referendum. As the UK voted to leave the
EU, this then caused a sharp drop in the pounds value, which then increased the costs of imported
goods from abroad, such as from the EU itself. As Sainsbury’s is a business that trades within the EU,
the effect of inflation has a negative impact. This is because an increase in prices will mean that
stock from suppliers will also increase in price, this will mean that Sainsbury’s costs will go up, to
counterbalance this Sainsbury’s would have to push up their prices. This will have a detrimental
effect on Sainsbury’s since consumers do not like to spend lots of money, so if Sainsbury’s has high
prices on their products, consumers will spend elsewhere, where prices are lower. The effect of this
,Unit 1 Learning Aim C and D
on Sainsbury’s is that they could lose loyal customers and see a reduction is their revenues and
profits. This could see Sainsbury’s discount competitors Aldi and Lidl stealing some of their
customers and their market share, Aldi sales have increased to 18.1% recently and the supermarket
is gaining market share quickly.
Social
Obesity
Obesity is defined as having an abnormal or excessive amount of fat that can possibly impair
a person’s health. Currently worldwide, there are reportedly over 1.9 billion adults who are
classified as being overweight. Shockingly, obesity rates in the United Kingdom are the
highest in Europe, which is extremely concerning. Figures from the Birmingham University
show that 20% of the population are obese. These both affect Sainsbury’s. Due to the fact
that there are a large amount of obese people in the UK and the EU, Sainsbury does sell
more sugary foods and drinks as well as junk food e.g. Fizzy drinks, sweets and crisps. This is
beneficial for the grocer because an increase in sales results in increased sales revenue and
in turn profits. However, as obesity is such a growing issue, protocols are taking place to try
and combat obesity. Due to this, supermarkets may see a decline in the sales of sugary
foods and an increase in sales of healthier options. For Sainsbury’s this could mean that they
may have to start to stock healthier brands and products for example, Weight Watchers.
In recent years, supermarkets including Sainsbury’s have started to change the way they
place their products. Previously, supermarkets would place sugary or unhealthy products
near checkouts and tills, as a consumer will be more likely to quickly grab one or some of
those products on their way out of the shop. This technique is called placement and is a
technique used by supermarkets which has proven to be very powerful. Another use of this
technique was to place unhealthy products at low height levels to attract children. However,
now supermarkets are being encouraged to change their strategy and place healthier
options near the tills and checkouts such as fruit and nuts. In my local Sainsbury’s, I have
noticed that when I am queuing up to checkout, there is an array of fruits including bananas
and apples, as well as water rather than sweets, crisps and energy drinks.
Ageing population
An ageing population is what we currently have in the UK and across Europe. It essentially
means we are living longer; this is largely due to more people being more active and
healthier. The effect of this is that there are more elderly people who will have pensions; a
state pension and the other perhaps a private pension of their own, which they have paid
into over a period of time. This means they will have more disposable income which could
result in them spending more money, for example on groceries in supermarkets such as
Sainsbury’s. This of course is a good thing, as it would mean an increase in sales.
Technological
Self-checkouts
The introduction of self-checkouts where customers scan and pay for their items using a machine,
means that Sainsbury’s cuts its operating costs as they will need less staff who would usually operate
the tills. This is beneficial as Sainsbury’s saves money which can go towards further invest in the
, Unit 1 Learning Aim C and D
business. It also makes the business more proficient and productive, generating more revenue in the
long term.
Online shopping
Since the introduction of the internet, online shopping has taken off; many people are now ditching
physicals stores and are now ordering online from the comfort of their own home. For example,
many people are ordering their groceries online; so many retailers now offer home delivery.
However, this means less people will be going into physical Sainsbury’s stores, in addition, there are
many comparison websites, one of the most popular being “Mysupermakret.com” which is a
comparison website which allows consumers to look for their favourite products and compare the
prices to find a cheaper price. This will have an impact on Sainsbury’s because if a competitor has a
cheaper price, they will lose customers, meaning they will have to lower their prices to attract
customers.
Broadband
In addition, the introduction of broadband, Wi-Fi and developments such as Skype allows Sainsbury’s
to communicate and interact without physically travelling, which is very cost-efficient, it also makes
the business easier to manage because the grocer can communicate with other departments
worldwide which makes them more collaborative.
Legal
Legislation is defined as the process of making or enacting laws, the way a business can operate is
controlled by legislation. Laws are introduced by the UK government or the EU, however since the
UK is planning to leave the EU, this is an issue. One of the main aims of Brexit is to leave the EU so
the UK feels as if the EU has imposed too many laws on us. So one reason why the UK voted to leave
is to gain their sovereignty back. There are many laws affecting UK businesses which I will explain in
detail below and I will also give example of EU laws as Sainsbury’s is a business that trades within the
EU. If Sainsbury’s or any businesses does not comply with these laws they can be faced with
prosecution or fines.
UK laws affecting businesses
The National Living Wage
The national living wage for employees aged 25 and above will be £7.20 per hour, this will affect
Sainsbury’s because they will incur extra costs, which means their profits will reduce. In order to
counter balance this Sainsbury’s may have to increase the prices of their products. This isn’t
beneficial as it will have negative effects such as consumers going elsewhere to competitors with
cheaper products i.e. Aldi and Lidl. Since Brexit, prices have already increased due to inflation, so
increasing them even more would mean the grocer would lose out on customers. The increase in
pay will have a large impact on Sainsbury’s as they have over 150,000 employees, this means that
they have to pay a large amount more to their employees as they have such a large amount.
Corporation Tax
Corporation tax is defined as a tax deducted from company profits which the majority of companies
have to pay, it goes to the government. Over the years, corporation tax has varied slightly. For
profits over £300,000 which applies to large businesses such as Sainsbury’s the corporation rates
were as followed. In April 2015, the tax was 21%, April 2015, it was 20% and the same in April 2016.
However, in April 2017 this has reduced by 1% to 19%, the reason for this is because the government
uses this as an incentive to encourage businesses to open and trade in the UK. This will have a
