In the dynamic business environment manager of the firm has accountability to take decision by making in-depth evaluation of each and every aspect. In the present report, three articles have been selected pertaining to diversification, micro environmental factors and BREXIT. In this report it has been clearly explained to which extent diversification of business enterprise is necessary. After diversification a company or a firm can be classified as a diversified company(Stanley and Doucouliagos, 2012). A clear definition of a diversified company is a firm or a company which has diversified its business activities in various unrelated business activities. Unrelated business activities can be explained as those business activities which has a separate market with its own unique and potential buyers as well as the products and services are also different from the existing business. In this report it has been mentioned that how Tesco has acquired other businesses, which assist it to make out growth and to achieve its goals and objectives. Mergers and acquisition are the part of business diversification. It helps and organisation to acquire the businesses of rivals who are operating in the same market as well as it also helpful for sick industries which are not earning required profits. If such sick industries are acquired by entity like Tesco which has a brand image then such industries and their products and services can also grow simultaneously. Diversification of business enterprise can be considered as the key to success for it. In this report story 1 contains mergers and acquisition of Tesco and its effects through diversification. In story 2 effect of change in Micro business environment of Sainsbury has been mentioned and in story 3 impact of BREXIT in business organizations of UK has been elobarated.
Business diversification leads to success of business enterprise. Diversification can be made through mergers and acquisition. Merger can be explained as a friendly take over because when a company is going to merge with another company, at that time they have some mutual interest and there are certain condition which are required to fulfil. One of the condition which supports the fact that merger is a friendly take over is that in merger the purchasing company needs to continue the business of vendor company for a certain period. On the other hand acquisition or purchase of company can be considered as a regular takeover because in this there is no such condition(Koo,2013). Diversification strategies are used by Tesco to expand its business. Further it also assist the management of Tesco to develop its product and services to fulfil the needs and requirements of its customers. Cited entity has made an expansion plan to grow its organisational structure and to capture the target market. From 1950 till now, it has owned more than 800 stores. Tesco started trying to expand its business in year 1957 when it acquired 70 Williamson's stores and continues it by acquiring 200 Harrow Stores Outlets in year 1959. After that it has purchased 212 Irwins stores in year 1960 and 97 Charles Phillip Stores in year 1964 (Growth strategy - Tesco’s “Related-diversification” into Family Restaurants. 2013). After a gap of 4 years it purchased Victor value chain in year 1968. In the year 2001 Tesco and its management team has tried to meet the requirement of new generation by moulding itself into a internet grocery retailing in USA. Major move of Tesco can be considered as the move of acquiring T & S Stores which used to operate in market of United Kingdom. Through such moves cited entity has diversified its business activity through which it explored new customers(Lindner and et. al., 2010).
Effect of changes take place in micro business environment on Sainsbury
Micro environmental factors include customers, suppliers, competitors, public, marketing intermediaries etc. that are highly associated with the business unit. All such factors have direct and high level of impact on the growth as well as success of the business operations. Beside this, micro environment is the internal part of business organization which can be controlled through the means of sound strategic and policy framework. By making assessment of news it has been determined that competitor’s policies and strategies closely influence the productivity as well as profitability aspect of retail business organizations.
News article presents that, sales of J. Sainsbury fallen down in 2016 due to hike in food prices and discounting strategies employed by major supermarkets such as Tesco, ASDA, ALDI, LIDL etc. The rationale behind this, condition of deflation has affected the purchasing power and decision making of customers to the large extent. Thus, now customers prefer to purchase products or services from the retailer who charges very less price and offers high quality products. Further, now there are several retailers which are offering high level of discounts to the customers with the aim to entice sales and profit margin(Seiler, 2012). Hence, for building and sustaining competitive edge over others company starts offering high level of discounts to the customers. In retail sector, Tesco, Sainsbury, ASDA, Morrison, LIDL and ALDI are the major players which are facing stiff or cut-throat competition from each other (Sainsbury's sales fall as 'challenging' market persists. 2016).
For attaining success in the highly competitive business environment Sainsbury has taken move in relation to improving the multi-channel proposition. Hence, for diversifying the business operations and maximizing profitability Sainsbury has taken decision in relation to buy Argos. Moreover, reduction in cost level is highly required for offering products on highly discounted prices. Hence, due to the failure of making high level of control on expense loss was suffered by supermarket(Fine, 2012). In addition to this, Sainsbury has also placed high level of emphasis on building strong online retail platform. Moreover, online retail store provides customer with high level of convenience and enables them to make shopping whenever they want. Hence, by considering such aspect it can be said that competitors and customers closely influences the success of and strategic framework of business unit. Micro environmental aspect enables firm to make suitable changes and thereby enjoys desired level of outcome.
Impact of Brexit on UK business organizations
From research article, it has been assessed that, in 2016 British authorities voted to leave EU. Consequently, value of pound has fallen down to its lowest value which is not good indicator for the firm. Hence, BEXIT have high level of impact on the business organizations which are operated in UK. For instance: The rationale behind this, most of the raw material is imported by UK from Germany. In this, if UK leaves EU then there would be no relationship between them. Meanwhile, cost of suppliers will increase which in turn directly affects the pricing strategies and level of the firm. Due to such rising price level business unit will be compelled to charge higher prices for the products or services offered(Altig and et. al., 2011). This in turn closely influences productivity and profitability of firm. Moreover, customers are highly price conscious in nature and prefer to purchase product from the retailer who offer products at affordable prices.
In addition to this, export business of UK will also be affected in a negative direction in the case of BREXIT due to higher cost and tariff charges. By taking into consideration the statistical aspects, it has been identified that export contribution of UK to the rest of EU accounts for £133 billion. Such amount is related to the half of global goods export and helps UK in ensuring high level of economic growth as well as development. Thus, if UK leaves EU without doing any kind of negotiations regarding new trade agreement then it may result into £4.5 billion a year. By keeping all such factors in mind it can be said that BREXIT will highly influence the competitive position or aspect of UK to a great extent. Along with this, Bank of England also believes that BREXIT may result into rise in inflation such as 2% in 2017 and it would be 3% during this accounting year(Stanley,and Doucouliagos, 2012).
Besides this, BREXIT will negatively influence the situation of employment in terms of 6.5%. Hence, such recessionary condition may turn into loss of jobs such as 500000. Statistics show that now 2.1 million European immigrants in UK. In the recent times, immigrants make vital contribution in the health sector and offer high quality care services to the patients. Hence, situation of BREXIT will create a huge gap between the aspects of demand and supply. Further, situation of BREXIT will also highly impact foreign direct investment. Foreign direct investment of UK worth of £1 trillion is invested by the rest of EU. Thus, if UK leaves EU then it will negatively affect investment. Moreover, high tax and tariff may result into reduction investment. In this way, BREXIT has high level of negative impact on UK business organizations.
Decision in relation to BREXIT will also offer some benefits to UK in terms of freedom in relation to making contribution in budget. Moreover, in 2015 contribution of UK in EU budget amounted to £13 billion. Hence, freedom in relation to such aspect also may result into significant improvement in the financial position and performance. Further, BREXIT also offers freedom to UK business units to make business transactions around the world (Brexit: the impact on the UK and the EU. 2015). Along with this, BREXIT will reduce or remove the obligations of UK in relation to comply with rules and regulations made by EU. Hence, BREXIT has both positive and negative impact on the business organization which is performing in UK.
From the above report, it has been concluded that economic and business environment are the major elements that have great impact on business operations as well as functions. It can be revealed from the report that micro environmental changes have high level of implications on business unit. The rationale behind this, retail market is highly competitive and now customer’s expectation level also increases with the very high pace. In this, company can achieve success only when it takes quick action by analyzing the market conditions or aspects. It can be seen in the report that Sainsbury has given quick response in relation to micro aspects by offering high level of discounts to the customers. Along with this, it also has been articulated that situation of BREXIT has both the sides such as positive and negative. Each and every sector will be affected if UK leaves EU. It can be inferred that FDI will be reduced after BREXIT which in turn directly influences the economic growth and development of UK. Besides this, it can be summarized that inflation, rise in unemployment etc. are the major conditions which will be faced by UK after leaving EU. It has been presented from the article that after EU, UK would become to perform activities with high level of freedom.
This Sample Case Study provided by Assignment Prime - Online Assignment Writing Service Platform.
- Altig, D and et. al., 2011. Firm-specific capital, nominal rigidities and the business cycle. Review of Economic dynamics.14(2). pp.225-247.
- Fine, S., 2012. Estimating the economic impact of personnel selection tools on counterproductive work behaviors. Economics and Business Letters. 1(4). pp.1-9.
- Koo, D., 2013. Elements of optimization: with applications in economics and business. Springer Science & Business Media.
- Lindner, M.A and et. al., 2010. Cloud economics: Dynamic business models for business on demand. International Journal of Business Information Systems. 5(4). pp.373-392.
- Seiler, C., 2012. The data sets of the LMU-ifo Economics & Business Data Center–A guide for researchers. Schmollers Jahrbuch. 132(4). pp.609-618.
- Stanley, T.D and Doucouliagos, H., 2012. Meta-regression analysis in economics and business (Vol. 5). Routledge.