Internal And External Business Environment Of Bunzl Plc
Bunzl is one of the world’s fastest growing specialist distribution groups in international market.The groups specialized in providing one-stop-shop for customers within several business sectors.The business includes producing a range of product including outsourced food packaging, disposable supplies and cleaning and safety products, caterers, non-food retail, hotels, etc.
Its operations spread across North America, Europe and Australasia. Within this paper, we will focus more on the retail sector of Bunzl’s business environment.
The company existed as far as 1854, as a haberdashery business founded by Moritz Bunzl in Slovakia, but it was not named Bunzl plc until 1940. The Bunzl family transmigrated to US and Europe and formed Tissue Paper Limited, the original name for Bunzl plc. During its early years, the company enters various types of business some of them were successful and some other are failures. Going through several changes of direction, the company did not loose its existence in local as well as international market.
Today, the company is a focused international value added distribution and outsourcing group, with the addition of Filtrona, a supplier of fibre and plastic technology products to international niche markets, listed as a separate entity (‘History’, 2006). Within this paper, I will perform an analysis on the internal and external business environment of Bunzl plc. The following chapter will elaborate how the company manages its internal conditions during its daily operations. The next chapter is about the external conditions of the retail sectors, and the challenges it brought to Bunzl plc.
In the later part of the paper, there will be a short analysis on how best Bunzl perform its strategic management to face corporate challenges. II. Internal Strategic Environment of Bunzl Plc II. 1 Bunzl Core Competencies Bunzl has formulated a range of corporate mission to guide its steps in daily operations. The company supported manufacturers who assist in satisfying customers’ needs for the benefit of all. It aims to provide services of such excellence that customers prefer Bunzl as their supplier regardless of the brand and product they select (‘About Bunzl Distribution’, 2006).
If all successful companies have their own values that describe their competitive advantages, for Bunzl, it is the effective and creative utilization of technology. The company has only a single and uniform hardware and software platform to operate its business. The main data center of the company resides at its Corporate Headquarters in St Louis. The facility includes UPS generator, dual A/C and redundant telecommunications. The company also has a ‘hot site’ disaster recovery center where all transaction data are relayed to this site as a protection from natural disaster (‘Bunzl plc – Major Products and Services’, 2006).
The company has a real time software system consist of order processing, purchasing, receiving, billing, sales, warehousing, distribution and accounting modules. All locations of Bunzl operations are equipped with those software and all of them are connected to a centralized database repository, which is maintained by corporate IT staff. The company also maintains a National Accounting Customers system that provides customers from all over the country with standardized reports (including fill rates, sales tracking, item utilization, etc).
In the retail sector, the company has an extensive network of distribution centers that serves retail supermarkets. Using the technology elaborated above, the company aims to maintain the quality of its services. Furthermore, it utilizes e-commerce facilities for online ordering and EDI computer-based technologies to support its ongoing strategies to increase productivity, service quality and achieved their ‘packaged of performance’ slogan. E-commerce technology is also used to continue explore new business opportunities.
These new business opportunities might be pursued in the form of internal growth as well as acquisition of new business (‘Bunzl plc – Major Products and Services’, 2006). II. 2 Product and Market Management Bunzl retail segment grocery customers include small, regional and national supermarket chains as well as warehouse grocery stores. The retail segment provided Bunzl’s customers with disposable packaging, supplies and carryout items. The retail outsourcing segment has a fleet of over 370 trucks, operating through 83 locations in North America and serving all 50 states, plus Canada and Mexico (‘Bunzl plc- Business Description’, 2006).
The company is the leading distributor of disposable paper and plastic packaging supplies to the retail grocery industry. This includes the self-distributing chains and wholesalers. Bunzl is the company who is recognized for revolutionizing the outsourcing industry. The company revolutionized that industry by developing sophisticated marketing, procurement and logistics systems designed to lower the delivered costs of supplies. Within this retail sector, Bunzl offers customers three types of logistics systems, which are: ? Direct-Store-Door (DSD), which constitutes a direct delivery to customers stores and supermarkets
? Warehouse Replenishment System, which describes a just-in-time delivery system to customers’ warehouses instead of to customers’ retail stores. ? Cross Docking, which describes a system that serves clients in accordance to their individual stores’ needs? It is a system of individualized store-ready deliveries. (‘Bunzl plc- Business Description’, 2006) II. 3 Financial and Performance Management From the figures displayed in their financial report, the company displayed an increasing amount of sales and net profit during the last decade.
This displayed a considerable growth of market share which is an important indicator of overall corporate performance. The profit margin and operational ratios also display positive indication. A more detailed data revealed that the company made ? 2,182 million from sales in the year 2000, while in the year 2005; the sales number went up to ? 2,916 million. Other sales numbers between the two periods indicated a stable increase of corporate performance. The operating profit account of 2000 displayed a number of ? 165 million, while in 2005, this number changes to ? 205 million.
The number between the years also displayed a stable rate of increase. Other accounts from the income statement as well as the balance sheet indicated that the company manages their resources in a very presentable manner.II. 4 Human Resource and Culture Management In terms of human resource management, the company aims to provide employees with real jobs since the fist day of work. This means that the company will expect high quality of working performance, but not before all employees are provided with training that involves practical experience as well as formal programs.
The company has high expectations on key personal skills such as teamwork, leadership, self-development, innovation and creativity. Maintaining these programs, Bunzl aims to: ? Increase employees’ personal effectiveness by concentrating on the tried and tested techniques used by managers and specialist around the world. ? Improve employees’ financial understanding by providing them with programs that educated employees to interpret financial information and make decisive contribution to the key financial ratios of the business
? Help employees to concentrate on team working and enablement, making each of them realized that enablement of individuals are crucial to a team’s success, etc Graduates that joined with Bunzl stated that Bunzl has a carefully structured training scheme, which covers a wide range of areas and gives trainees exposure to the whole organization. They stated that the company only take few graduates but tend to be encouraging in the process of developing their practical as well as decisive skills. They also mentioned that the company values teamwork and equality in performing team tasks.
III. External Business Environment of Bunzl Plc III. 1 Macro Environment (PEST Analysis) ? Political Politically, the company did not have many obstacles that harm growth. The company operates in foreign markets, but limited to the regions of North America, Europe and Australasia, in which, political business restrictions are minimum. Because Bunzl do not perform business activities in China or in other Asian economy, the business experiences minimum complications when it comes to government regulations, market entrance and tax.
The company also has a reputation of providing employees with equal work treatment, this keeps all problems of race and nationality away forms Bunzl operations (Desloge, 2005). Furthermore, Bunzl plc is officially headquartered in London, who provided it with a slightly lighter burden of taxation. Nevertheless, because most of the group’s operations are in countries with higher tax rate (US and European countries); the taxation charge recorded for Bunzl in its financial report could be higher that the UK base rate.
For instance, in 2004 the recorder tax rate was 32%, which is slightly higher that the nominal UK rate of 30%. Another political obstacle is the approval of regulators in foreign country. This is because a country’s government where Bunzl interests in needs to protect local players. Therefore, politically, the objective of Bunzl to enter new market in a foreign countries might be delayed due to regulation to protect local players. ? Economic The retail segment is naturally a capital intensive business. Retail companies generally perform considerable borrowing actions which will be paid-off gradually by years of profit.
In the case of Bunzl, the company has been on the business for decades and therefore, has already a low debt to capital ratio. In order words, the company no longer has to carry the heavy burden of interest rates. Nevertheless, the company performed numerous large acquisitions in its operational years that new borrowings are made occasionally. For example, the net interest charge for continuing operations increased to ? 10. 8 million from ? 2. 9 million because increased average borrowings due to recent acquisitions (‘Bunzl eyes more acquisitions’. 2006).
Environmentally, only a small portion of the increase in interest charge is caused by fluctuation of interest rates. The environments in which Bunzl performs its operations are comparatively stable. The translation issue also has a weak influence over corporate profitability. Any fluctuation would not cause changes to more than 1% of sales number. According to Porter and Ketels (2003), within the last two decades, the UK economy had shown some excellent economic metrics. They also said that the awareness on the issues of competitiveness had also increased significantly.
This situation had helped the country to improve the country’s prosperity since there is an increase in the level of labor force utilization (hours worked per employee, employment rate, and labor force participation rate). In addition, they found that the country had experienced good growth in labor productivity while the country’s export market share and the attractiveness of FDI (Foreign Direct Investment) were still stable. Despite the excellent performance in some economics metrics, Porter and Ketels (2003) pointed out that UK still lag many other advanced economies.
They said while labor utilization is at high level, the country still face low labor productivity (Porter and Ketels, 2003). ? Socio-cultural Concerning the socio-cultural aspects, the company might consider following questions like, what are the attitudes toward foreign products. How strong are the environmental issues? Are they important to address especially if we are embarking on international markets? (“PEST Analysis”). Under such circumstances, the customers and manufacturer/service providers, like Bunzl are closely related.
It further influences the way Bunzl interacts with their suppliers in order to ensure the products tailored to fit their customers’ needs and faster delivery. In the socio-cultural aspect, the company does not deal with extreme differences of culture, as faced by other multinationals. On the other hand, the company faces a slightly more demanding corporate social responsibility (CSR) practices. Modern communities in the North America, Europe and Australasian region are more aware of the importance of a good CSR practice by multinationals.
In the case of Bunzl plc, besides ensuring all-ethical operational processes, the company also performs various community investments. There is no apparent socio-cultural debacle in the corporate history. ? Technological The technological environment provided a tremendous chance for growth to Bunzl. The company lives within an advanced society where access to technology is practically limitless. The technology provided the company with the potential to increase the quality of its outsourcing services. For example, Bunzl can develop centralized procurement system, which employs computerized system as shown in the following figure: