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Essay Unit 1 - Exploring Business PESTLE Graded
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In this report I will be looking at PESTLE to discuss, assess and evaluate the effects of it on Sainsbury.
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Moses Ogunbiyi – Unit 1 Exploring Business Learning Aim C:Examine the environment in which business operate
In this report I will be looking at PESTLE to discuss, assess and evaluate the effects of it on Sainsbury.
Sainsbury’s was founded in 1869 by John James and Mary Ann Sainsbury and it is currently the second
largest PLC chain of supermarkets in the UK with over 600 supermarkets and 800 convenience stores.
They sell a variety on tangible item such as: food, clothing, toys, electronics, medications and more.
Additionally, they sell intangible service such as insurances which can consist of car, pet, life, travel, home
and over 50s Life insurance. Sainsbury’s purpose is to provide high quality service to customers and
maximize financial returns to stakeholders. Their aim is to exceed customer's expectations for tasty food,
services and products to make their lives easier every day.
The graph below ranks the top 10 UK supermarkets based on their shares:
https://www.statista.com/chart/19075/uk-supermarket-market-share/
PESTLE is used to assess the market for the external factors of a business environments. PESTLE is an
acronym that stands for: Political Factors, Economic Factors, Social Factors, Technological Factors, Legal
Factors and Environment Factors. It is a useful tool which is used to understand market growth or decline.
The Effect of PESTLE on Sainsbury
Political Factor:
Political factor refers to how government action or global issues can affect Sainsbury state of operation.
, The first Political factor that can affect Sainsbury is Brexit which is the withdrawal of the UK from the EU.
When the UK leaves the EU, they lose benefits of their membership such as international trading
communities within the EU, which can provide a stable supply chain that reduces barriers and enables
companies to strive. This can affect Sainsbury as it limits their supplies and trading chains that operate in
the EU. For example, food and clothing products from Germany and Spain coming into England. This can
stun the development of profit as Sainsbury cannot fully satisfy customers’ needs and wants as they are
getting insufficient goods to do so, which can result to the loss of customers. Additionally, it escalates the
outflow of cash as corporation tax on businesses will increase so that the UK reparation of an estimated
£39 billion will get paid off.
Due to the unfortunate circumstances of Brexit, the UK will have to pay for new trading deals to replace
their old ones which can be highly expensive to maintain and time consuming to find. This is bad for
Sainsbury as it reduces customers loyalty, expectation and spending power on their business as no useful
or new goods are being acquired by them during this process of looking for a new supply chain, which can
have a negative impact on profit. However, once the reparation has been paid, and their trading deals has
been established, an advantage can be the decrease of corporation tax on businesses due to the UK
abdicating their EU membership which comes with yearly fee of £8.9 billion. Therefore, cancelling their
subscription fee can help to better manage their taxation cost which can improve their flow of cash. They
can even secretly charge customers more on goods and services as a way to make up the profit they lost.
The pie chart below shows nearly half of the UK trades in 2018 came from the EU, 11% came from countries
that are not in the EU but are allowed to trade with EU members as they have an agreement with them. And
the remaining 40% are from the rest of the world that have no involvement with the EU:
https://www.bbc.co.uk/news/uk-47213842
VAT (Value Added Tax) is the sales tax that is added to the price of most goods and services sold in the
UK. The current rate of VAT is 20%, if VAT increase above 20% then businesses like Sainsbury would
have to increase prices of their goods and services to accommodate the lost in profit as they pay more for
supplies. This can impact Sainsbury as customers will begin to get discourage when purchasing item as
they are sold at high price to regain lost profit, therefore encouraging customers to place their sight on
nearby competitors who prices are lower as they are more cost effective for them, which can reduce
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