Unit 1: Business and the

Business Environment

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Table of Contents
Task 2 (AC LO3.P4, M3, LO4.P5, LO4.P6, M4, D2) ............................................................... 1

LO3 Using contemporary examples to demonstrate both the positive and negative
influence/impact the macro environment has on business operations. ...................................... 1

Political factors: ..................................................................................................................... 1

Economic Factors................................................................................................................... 1

Social and cultural Factors ..................................................................................................... 2

Technological Factors ............................................................................................................ 2

Environmental Factors ........................................................................................................... 2

Legal factors........................................................................................................................... 3

LO4 Determining the internal strengths and weaknesses of specific businesses and explaining
their interrelationship with external macro factors. ................................................................... 4

SWOT Analysis of Morrisons ............................................................................................... 4

Strength .............................................................................................................................. 4

Weakness ........................................................................................................................... 4

Opportunities...................................................................................................................... 4

Threats................................................................................................................................ 5

Relations of Strengths and Weaknesses with Macro Environmental Factors........................ 5

References .................................................................................................................................. 6

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Task 2 (AC LO3.P4, M3, LO4.P5, LO4.P6, M4, D2)

LO3 Using contemporary examples to demonstrate both the positive

and negative influence/impact the macro environment has on business
operations.
Macro environment refers to the external factors which are beyond control and affect day to
day performance, short and long term strategies and the overall decision making within an
organization. These external factors consist of political, economic, social and cultural,
technological, environmental and legal forces. Any sort of changes in the taste, demand and
preferences of consumers, volatility in interest rates, modification in government policies are
crucial examples of macro environmental factors. The macro environment both immensely
affect the business environment of a supermarket chain like Morrisons. The transformation of
the market trend on the basis of different social factors like UK’s eradication system positively
affects Morrisons’ business in form of customer segmentation in line with greater opportunity
to create appeal to a larger chunk of customers resulting in an effective and sustainable growth
of their business (Groceries.morrisons.com, 2017).

Political factors:
Right after Britain cast vote to leave the EU back in June 2016, many people began to consider
it to be a probable beginning of both political and economic turmoil and ambiguity for the UK
economy even if it is short term. Such a political disruption due to Brexit has also demonstrated
the higher possibility for a second Scottish independence referendum with a view to protecting
the rights of Scottish people in the EU as the majority of them voted to remain in the EU (the
Guardian, 2017). As a result of such decision of leaving the EU, there lies a possibility for
Brexit inflation where prices for goods of companies like Morrisons would start to increase
due to the weakening pound making the imports comparatively more costly, and it would keep
getting worse if Britain finally leaves the EU prior to 2020.

Economic Factors
As an impact of Brexit vote of June 2016, the pound sterling jumped to its lowest for around
30 years against the value of dollar. If this depreciation keeps to linger, it would put Morrisons
under huge inflationary pressures in form of higher raw material/packaging/transportation costs
in line with higher need for employment and additional cost burdens. The economists of UK is

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already observing a huge food consumer price inflation across the 2016 period resulting in
higher food prices. In recent year, two major beer makers named Heineken and Carlsberg have
suddenly increased raise prices across the UK, which would supposedly be carried by the
consumers. However, Morrisons has a privilege of having the right foundation which allows
them to outsmart the post-Brexit inflationary shocks. They are considered to be the most
vertically integrated supermarket across the UK with whopping 15 own production sites in the
country. This capacity signifies their less dependence on external suppliers (i.e.: from Europe)
and is a core strength as the goods manufactured in the UK is supposed to considered more
essential when the UK eventually leaves the EU (Palmer and Hartley, 2017).

Social and cultural Factors

One of the major social factors is the demographic changes including UK’s ageing population.
The UK average median age has rose higher from 32.9 years in 1974 to the present 42 years
with a large chunk of population with age range above 65 and stand for 1/5th of the population
of the UK (Ft.com, 2017). These ageing people represent the lucrative business opportunities
for supermarkets like Morrisons. As these pension age consumers have relatively higher stable
source of income and the likelihood of being fully employed for a long period of time,
Morrisons can capitalize their affordability to buy from their outlets.

Technological Factors
The boost of IT and digital retailing culture has paved the way of revolution in the food retailing
industry. With a small percentage (11%) of the total market sales, this platform is currently
becoming the most wanted platform while increasing the competition among the industry
leaders like Tesco and Asda (Retailresearch.org, 2017). Such major improvements in the
industry demonstrates the reason of Morrisons lagging behind in the race and still locating in
the 4th position. Thus they are currently working on introducing grocery e-commerce and
improving their brand image after partnering with Ocado.com back in 2014 (The Independent,
2017).

Environmental Factors
The current hype of being ethical and environment friendly among the consumers and
environmentalists have made companies like Morrisons to exercise practices like paper
packaging as well as utilizing recycled materials. Most of the consumers have planned to quit
companies without the ecofriendly credentials (Worthington and Britton, 2016). Fortunately,

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Morrisons was rated as ‘Most sustainable retailer of the year’, back in 2013 after unswervingly
using and serving sustainable product ranges while involving in ecofriendly practices.

Legal factors
The major legal factors consist of changes new workplace pension legislation, which needs a
mandatory funding of pension contributions from workers’ pay-scales. Morrisons has adopted
this policy in their compensation tradition (Mirror.co.uk, 2017).

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LO4 Determining the internal strengths and weaknesses of specific
businesses and explaining their interrelationship with external macro
factors.
A business organization is directly and indirectly affected by both internal and external
environment factors. While coming up with any sort of strategic decision, one must go through
a comprehensive analysis of both internal and external environment in order to get insight about
the surrounding environment of that particular business. This assessment of the internal and
external environment, firms can figure out their core strengths and weaknesses and build
strategies accordingly (Telegraph.co.uk, 2017).

SWOT Analysis of Morrisons

Strength
Morrisons has successfully established their expertise in new market entrance and such
expansion enables the company to develop new source of revenue stream and reduce the risk
of economic cycle. Besides, Morrisons has invested in building a strong brand portfolio and
free cash flow which has strengthened their ability to expand into new product lines and
projects. Additionally, their robust distribution network gives them the widened scope to tap
major market (Mirror.co.uk, 2017). They have a large chunk of satisfied and loyal customers
in line with a loyal dealer community and extremely skilled workforce, helping them in acing
the competition and gain competitive advantage.

Weakness
They have a below average profitability and net contribution ratio with a vague positioning and
value proposition of their products. Besides they have poor employee retention ratio and lack
the capacity to forecast product demand and conduct financial planning leading to high
inventory and inefficient supply chain. Besides, their organizational structure is not compatible
enough with inadequate investment in new technologies.

Opportunities
Their capacity of market development might result in higher competitive advantage over the
rivals. Besides, the new environmental policies would create an even platform for all the
industry leaders and higher share gaining opportunity for Morrisons (Retaileconomics.co.uk,
2017). Besides, their recent record of sufficient investment behind enriching the online
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platform in supposed to generate new sales channel and enhance their brand demand. The
implementation of new technology would widen their chance to attract new customers while
retaining the existing ones. Besides, the flexibility in recent international trading policy by
several governments with sufficient boost in customer spending as well as the consumer
behavior uphold a great opportunity for Morrisons to generate larger revenue streams and
enrich diversification.

Threats
The rising trend of isolationism across the USA might hamper their international sales. While
the constant development and investment in new technologies intensifies the competition.
Besides their irregular supply of innovative products and increasing pay level are supposed to
hurt their profitability (Birminghammail.co.uk, 2017).. The situation gets worse with complex
new environment and liability laws imposed on retailers. Besides, the nature of demand for the
highly profitable products remaining seasonal and the fierce competition across the industry
might hamper their profitability and overall sales.

Relations of Strengths and Weaknesses with Macro Environmental Factors

There is a close tie between Morrisons’ internal strengths-weaknesses with the external factors.
Morrisons’ expertise in new market entrance and building large brand portfolio would enable
them in diversifying the risk of facing losses in the UK and they can enter markets with less
impact of the Brexit issue. Besides, their robust free cash flow has strengthened their ability to
expand into new product lines and projects, which in return would enable them in meeting
varying customer demands (Yorkshireeveningpost.co.uk, 2017). Additionally, their robust
distribution network gives them the opportunity to serve customers from different regions all
around the world. They have a large chunk of satisfied and loyal customers in line with a loyal
dealer community which can be capitalized during establishing brand image in utterly new and
untapped markets and enhance the profitability, growth and market share. They should work
on their weaknesses in poor technology investment, employee retention demand forecasting. If
they succeed in lessening this drawbacks, they would indeed be able to gain greater profitability
and ensure a sustainable journey in the long run.

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References
Birminghammail.co.uk. (2017). Morrisons - News, views, gossip, pictures, video -
Birmingham Mail. [online] Available at: http://www.birminghammail.co.uk/all-
about/morrisons [Accessed 16 Dec. 2017].
Ft.com. (2017). UK Business & Economy. [online] Available at:
https://www.ft.com/world/uk/business [Accessed 20 Dec. 2017].
Groceries.morrisons.com. (2017). Morrisons | Online Shopping | Food, Drink & More To
Your Door. [online] Available at: https://groceries.morrisons.com/ [Accessed 17 Dec.
2017].
Mirror.co.uk. (2017). Morrisons - Latest news updates, pictures, video, reaction - Mirror
Online. [online] Available at: http://www.mirror.co.uk/all-about/morrisons [Accessed 19
Dec. 2017].
Palmer, A. and Hartley, B. (2017). The business environment. London: McGraw-Hill Higher
Education.
Retaileconomics.co.uk. (2017). Outlook for the UK retail industry in 2017 | Retail
Economics. [online] Available at: https://www.retaileconomics.co.uk/outlook-for-the-
UK-retail-industry-in-2017 [Accessed 19 Dec. 2017].
Retailresearch.org. (2017). UK Retail after Brexit - Centre for Retail Research, Nottingham
UK. [online] Available at: http://www.retailresearch.org/brexit.php [Accessed 20 Dec.
2017].
Telegraph.co.uk. (2017). Morrisons - Latest news about Morrisons Supermarket, stocks and
shares prices. [online] Available at:
http://www.telegraph.co.uk/finance/newsbysector/epic/mrw/ [Accessed 20 Dec. 2017].
the Guardian. (2017). Morrisons | Business | The Guardian. [online] Available at:
https://www.theguardian.com/business/morrisons [Accessed 18 Dec. 2017].
The Independent. (2017). Morrisons. [online] Available at:
http://www.independent.co.uk/topic/morrisons [Accessed 17 Dec. 2017].
Worthington, I. and Britton, C. (2016). The business environment.
Yorkshireeveningpost.co.uk. (2017). Morrisons selling supersized British apples thanks to
unusual weather conditions. [online] Available at:
https://www.yorkshireeveningpost.co.uk/news/morrisons-selling-supersized-british-
apples-thanks-to-unusual-weather-conditions-1-8893565 [Accessed 18 Dec. 2017].

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