Report On Three Firms: Changes In Their Business Environment

Summary

This paper is a compilation of three articles reporting the stories of three firms that are dealing with change in their external business environment. Quick action, or the lack of it, decides the fate of businesses in such changing times. The first case refers to the acquisition of the Canadian coffee chain Tim Hortons by the American giant Burger King, and the following layoffs of 350 Canadian employees. This cross-border merger posed serious threats to the newly formed restaurant as consumers on both sides of the border are unhappy with this collaboration, given the history of undue American dominance and Canada’s struggle for economic independence. Therefore, cultural and historical factors also play a role in the success of a merger or acquisition.
The second article highlights how two macroeconomic factor in the external environment – legal and technological – affect businesses. Apple and Google’s software were declared to be prone to hacking due to weak encryption that was required by US law at the time these software were designed. Laws change and technology evolves requiring businesses to alter processes and products accordingly. This requires constant research and investment by the businesses.
Finally, a case has been chosen that highlights how understanding the changes in microeconomic environmental factors can help give businesses an advantage over competitors. Sainsbury has been the first of all retailers to realize that consumers today do not give more weightage to price than they give to ecological concerns when it comes to food items. Sustainably caught fish and approval by MSC government authority signaled by a blue label on the product, allows customers to trust the fish they purchase and such fish is seeing an increased demand. Sainsbury’s sustainable fish stocks have been high enough to meet demand whereas other retailers have still not understood this change in consumer demand.

Tim Hortons-Burger King merger resulting in Cross-border Controversy

Mergers and acquisitions have long been known for their by-product: layoffs. Similar was the result when Burger King – a US giant – acquired Tim Hortons – a Canadian brand of coffees and doughnuts, earlier this year. The 350 employee layoff announcement just followed the acquisition and resulted in negative consequences for both the eateries on both sides of the border. Burger King’s move was being criticized by the Americans as the newly formed Restaurant Brands International was located in Canada in order to avoid the new company’s tax burden in America, and thus, displayed total lack of patriotism. On the other hand, Canadians dislike the entire idea of losing Tim Hortons, a national asset - founded by a player of Canada’s unofficial national game, to the Americans, along with the added burden of job losses. Such a business decision could have appeared profitable on paper, but businesses should take into account the cultural, historical, and social implications of such a decision.
The acquisition has greater market access guaranteed for the newly formed company and an exchange of management skills, business ideas, and consumer profile information. Also a larger setup is guaranteed thus resulting in economies of scale – in terms of bulk purchases, financial, and managerial economies. However, without Canadian and American consumers’ willingness to purchase, the newly formed Restaurant cannot expect to perform well. A major factor that cannot be ignored is culture and cross-border acquisitions have to deal with two different sets of culture.
In this case, Canadians felt that their economic nationalism was being threatened through this merger as an American fast food giant was deciding the fate of employees at the Canadian chain - Tim Hortons. In today’s extremely globalized markets, cross-border mergers and joint ventures are not uncommon; however, in this case a load of ill-feelings prevail due to the history between the two countries (Baldwin & Winters, 2004). Canada has always been wary of America’s immense economic and social influence over neighboring markets, and to avoid being influenced by such an economic power Canada has always tried to be a self-sustained economy accepting no dominance from across the border. This acquisition was a show of the dominance of an American business over a Canadian one, thus resulting in a loss of both American and Canadian customers who ensure that their spending reflects their personal values (McGee, 2015).

Apple and Google Security Flaw due to Abandoned US Government Policy

The recent discovery that the internet browsers on Apple and Google devices used weakly encrypted software allowing easy hacking left the two technology giants in a panic to find the fix. The weak encryption was a result of a US law that has now long been abandoned, requiring that software makers used weaker security in encryption of programs sold overseas due to national security concerns. Sudden heavy investment in correcting this encryption weakness was required as both the companies provided software updates to strengthen the encryption.
This is a classic case demonstrating how government regulations or the legal factors in the external environment affect businesses. It is important to realize that while compliance with regulations is important, it is also important that businesses are prepared to respond to sudden consumer issues regarding product quality or safety. Such responses may require sudden investments, and in the case of Apple and Google this entailed an investment in technology, also demonstrating how technological changes need to be embraced by businesses. Therefore, this article highlights how two (Legal and Technological) of the six PESTLE (Political, Environmental, Social, Technological, Legal, Economical) factors affected two technology giants. Legal factors do not only stem from the national governments laws, but also from laws implied by state and local governments, and federal agencies. These bodies result in a myriad of legal webs that require careful planning to meet all regulatory requirements during production and sale of products. Similarly, technology is ever-changing and evolving and given the current rates of research, technological changes come and go very quickly. Technological changes can change production methods, improve efficiency, and, most of all, improve the product’s features and functioning. Therefore, technology based companies need to constantly invest in developing and implementing new technology. This requires the use of huge investments from retained profits, resulting in lesser dividends and complaining shareholders (Gitman & Mc Daniel, 2008).
All in all, Apple and Google have paid the price of a long abandoned US regulation, years after the manufacture that took place under this law. This not only demonstrates the impact of legal factors over businesses, but also the importance of a strong research function in technology-driven companies (The Guardian, 2015).

Rising Demand of Sustainable Fish requires Supermarkets to Stock up

Sainsbury has been one of the few supermarkets that have quickly understood that stocks of goods need to be adjusted to changing consumer demands. Today consumers want to buy sustainably caught fish in order to maintain fish populations in the world’s oceans. The blue label on fish packs that guarantee sustainable fish belong to the Marine Stewardship Council and consumers do not trust packages that appear without this blue label. Consumers prefer sustainable fish to the extent that price has become irrelevant. Sainsbury, thus, sees a high sales figure in the fish department and keeps these well stocked. Other retailers such as Tesco, Morrisons, Asda, and Marks & Spencer, should pick up on this changing demand pattern and stock more blue labeled fish to satisfy growing consumer demands (Smithers, 2015).
This article shows that several changes in the environment, such as a fad, a new environmental concern, or a new law, can result in a change in consumer demand. Consumers today have become more aware and more responsible, thus insisting that they spend every dollar on a wiser choice. Such a pattern of responsible decisions is shown by an improvement in the Greendex – an index that ranks consumers according to the environmental sustainability of their behavior (Appendix) (National Geographic, 2010).
MSC certified fisheries have been on the rise and so is the demand for the fish with blue label, therefore, retailers who are not stocking such fish are on the losing side. Studies have also revealed that consumers today, do not simply base their food choice on natural and healthy food content but also on the ecological impact of the food items being purchased (Bonaiuto et al., 2011). Therefore, from an economically advantageous point of view, retailers are better off stocking items that are in greater demand. If consumers are now buying their shrimps and cod with a greater concern for the environment, it should be perceived as a factor affecting consumer demand and should be incorporated into the supply decisions.
Sainsbury has been banking on satisfying consumer demand – the simplest law of economics – by stocking MSC certified fish that the environmentally concerned citizens of today demand.

Conclusion

An analysis of three firms in three different situations has revealed that the business environment is in a state of constant flux. The changes stem from multiple sources and multiple reasons, but the impact on businesses is unavoidable. Ensuring that the business is well aware of all the factors in work around its operations is an important pre-requisite for a successful business to operate in the globalized markets of today.
Mergers and acquisitions that occur across borders bring a host of challenges for both the companies involved. Adjusting to the change within the company and ensuring that the customers on both sides of the border may require efforts over the board. The case of Burger King and Tim Hortons analyzed here suggests that acquisitions are not solely evaluated on the basis of financial benefits; cultural factors, cross border histories and sentiments, and social values cannot be ignored while making such a decision.
Factors in both the macro and micro economic environment have a profound impact on the operations of a business. Macroeconomic factors such as legal and technological require that businesses make timely investments to provide the safest and compliant product while also ensuring that it uses state-of –the-art technology to drown out the competition. Apple and Google complied with an outdated law which brought into question the safety of their software. Microeconomic factors such as consumer demand patterns, competition, and suppliers affect the basic operations of a business. In the case of Sainsburys, quickly identifying a change in consumer demand pattern has helped the business to stock the right amount at the right time.
Therefore, responding to changes in the business environment is one of the key attributes of today’s business, because today, more than ever before, the external environment is constantly changing.

Appendix

Greendex Improvement 2008 – 2010.
Source: National Geographic, 2010.
References
Baldwin, R. & Winters, A., 2004. Challenges to Globalization: Analyzing the Economics. London: The University of Chicago Press.
Gitman, L. & Mc Daniel, C., 2008. The Future of Business: The Essentials. USA: Thomson Higher Education.
Mc Gee, S., 2015. Tim Hortons-Burger King merger serves big order of cross-border controversy. Available at < http://www.theguardian.com/world/us-money-blog/2015/feb/01/tim-horton-burger-king-merger-layoffs-canada> [Accessed on March 08, 2015].
National Geographic, 2010. Greendex 2010: Consumer Choice and the Environment – A Worldwide Tracking Survey: HIGHLIGHTS REPORT, June 2010. Available at < http://www.nationalgeographic.com/wpf/media-live/file/GS_NGS_2010GreendexHighlights-cb1275487974.pdf> [Accessed on March 08, 2015].
Smithers, R., 2015. UK supermarkets failing to stock enough sustainable fish, says report. Available at < http://www.theguardian.com/environment/2015/jan/30/uk-supermarkets-failing-stock-enough-sustainable-fish-report> [Accessed on March 9, 2015].
The Guardian, 2015. Apple and Google 'FREAK attack' leaves millions of users vulnerable to hackers. Available at < http://www.theguardian.com/technology/2015/mar/04/freak-attack-leaves-millions-of-apple-and-google-users-vulnerable-to-hackers> [Accessed on March 9, 2015].