BUS1001 Business Environment | Industry for Multinational Enterprise

ment 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.  

Economic 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.

Social Factors

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.

Technological 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.

Theoretical Model Shaping the International Business Environment of Sainsbury 698

CAGE Framework 

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.

OLI Framework 

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.

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.  

Blue Ocean Strategy

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.

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.

Future Trends within Industry for Multinational Enterprise

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 Use of Smart Phones

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.

Consume Dependence on Various Apps

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.  

Increasing use of Contactless Technology

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. .

Increased Use of Social Media Platforms

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.

Having a Web Platform

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:

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