Applied Corporate Strategy: Sainsbury and Asda Merger Case Study

This report explores the applied corporate strategy of the Sainsbury and Asda merger, including external analysis, industry attractiveness, resources and key competences, and strategic evaluation.

Applied corporate
strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
1. External analysis to identify opportunity and threats and assess industry attractiveness.......1
2. Resources and key competences of organisation and identify core competences..................3
3. Strategy Evaluation.................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Corporate strategy encompasses corporate action of firm with aim to accomplish
objectives of company with aim of achieving competitive advantages. Moreover,
corporate strategy estate a clear define long term vision which an organisation set, seek
for creating corporate values as well as for motivating staff to apply appropriate action
for gaining satisfaction of customers (Foucault and Frésard, 2019). In simple terms,
corporate strategy is continuous procedure which need constant efforts for engaging
investors in trusting business firm with their money because they help in increasing
equity of business.
This report is based on case study of Sainsbury and Asda merger. Sainsbury's
which is part of retail industry founded in 1869 and its founder was John James
Sainsbury. Its headquarter is located at London, United Kingdom and also serving in
UK. Assessment will going to conduct external analysis for identifying opportunities and
threats available for them in business environment. Along with this, industry analysis will
also conduct by using porter's five force model. In addition to this, internal analysis of
Sainsbury and Asda merger will conduct for identifying strength and weakness of
company. Unique capabilities of company will demonstrate by linking it to competitive
advantages using VRIO model. Furthermore strategic evaluation will also going to
conduct.
MAIN BODY
1. External analysis to identify opportunity and threats and assess industry
attractiveness
External analysis means examination of industry environment of an business
firm. This involve factors like competitive position, competitive structure, dynamic,
history and many more (Köhler and Zerfass, 2019). Primary purpose of conducting
external analysis is to determine opportunity as well as threats within industry and also
any segment which result in growth, profitability and volatility for organisation. For
external analysis PESTEL will going to conduct by company which is based on merger
of Sainsbury’s and Asda :-
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 Political – It have wide impact on working of an organisation because at the time
of merger there are several rules as well as regulation which Sainsbury’s and
Asda have to follow. Thus, changes in these law result in reduction of usage of
raw materials that effects the selling of various products. Sainsbury and Asda
merger is going to be affected because of this as availability of certain product
may fall in shortage which results in loss in selling of these products. Along with
this, low minimum wages result is higher profit for company and result in higher
chances of merger survival.
 Economical – This factor include inflation rate, foreign exchange rate, interest
rate, gross domestic product and many more. Emerging market work as
opportunity for merger of Sainsbury's and Asda because emerging market have
potential customers who has rising disposable income which will boost their
affordability. Thus, establishing stores in emerging market result in increasing
demand of such products within population and result in adding profitability of
business.
 Social – The social factors that impact Mergers and Acquisitions are a direct
reflection of the society that Mergers and Acquisitions operates in, and
encompasses culture, belief, attitudes and values that the majority of the
population may hold as a community. The class distribution among the
population is of paramount importance: Mergers and Acquisitions would be
unable to promote a premium product to the general public if the majority of the
population was a lower class; rather, they would have to rely on very niche
marketing. Moreover, digital marketing is an opportunity for Sainsbury's and Asda
merger as they can also facilitates customers through online shopping
(Oppenheimer, 2019). As it will help customer who have mobility issue by
providing flexibility to them as they can purchase daily needed products by sitting
at home.
 Technological – Digital market is technological factor which work as an
opportunity for Sainsbury's as they can also facilitates customers through online
shopping (Oppenheimer, 2019). As it will help customer who have mobility issue
by providing flexibility to them as they can purchase daily needed products by
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sitting at home. For example, Sainsbury's products are available in some
selected outlets across United Kingdom. However, same brand can be
purchased easily online through their websites.
 Environmental – Merger of Sainsbury’s and Asda may get impacted through
environmental factors as it will be difficult to manage transportation of both
resources finished and raw material. This may affect delivery dates product such
as unexpected monsoon. It is important for both the organisation to focus on
environmental factor while doing merger because now a day’s people are more
aware about environment.
 Legal – This factor include laws which design by government bodies for retail
industry organisation and they have to follow these for conducting daily basis
operations in more effective manner. Liability laws differ from country to country
and this may lead to various kind of changes regarding claiming of liabilities
(Ntene, Azasu and Owusu-Ansah, 2020). Sainsbury and Asda may have face lot
of claims regarding products sold by it which may happen because of the
changes in policies of claiming compensation.
Industry analysis – It is an business function which which completed by owner of
company as well as other person for assessing present business environment. In simple
term, industry analysis is the tool which assist company in understanding their position
relative with other organisation who are producing same products or services
(Waverman, 2019). Sainsbury's and Asda have to conduct industry analysis by using
porter's five force model as this observe five force that have significant impact on
profitability of business firm which they will gain after merger. Explanation of five forces
which involved within this are as follows :-
 Competitive rivalry – Retail industry is highly competitive as it have high crowed
market and now more companies are trying to enter within non food sector.
Thus, merger of Sainsbury's and Asda will face high competition from several
supermarkets such as Tesco, Morrisons and many more. As they are also
dealing within similar products such as clothings, food items, electronics and
many more. At margin similar cost result in switching costs low, hence customers
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can easily switch to other lower price supermarkets (Baena, 2019). Such
practices result in cut throat price wars as they have to conduct advertisement in
effective manner and try to bring innovative product for gaining competitive
advantages. This forced respective company to get merge with Asda for
surviving in cut-throat competition within UK food industry. Thus, competitive
rivalry for Sainsbury's and Asda merger is high.
 Power of buyers – customers of Sainsbury's and Asda have high bargaining
power due to other supermarkets availability like Tesco Aldi, WM Morrisons and
many more who are offering same products at related costs. This result in
switching cost of product low as well as give power to buyers for selecting best
competitive offers in same price range (Adler and Florida, 2019). Moreover, there
are several customers who tends to be loyal for price instead of brand, this is the
major reason they are shifting towards Aldi and Lidl in last years.
 Power of suppliers – For Sainsbury and Asda bargaining power of suppliers will
be low because of numerous suppliers availability within market. Due to merger
some suppliers will demand high as they have option to change it with other
because several are available in market. They will purchase from suppliers who
offer at low prices because it will result in enhancing their profit margins that
result in losses on the side of suppliers (Sako and Zylberberg, 2019).
 Threat of substitute – Sainsbury and Asda both are part of retail industry and
getting merger apart from them there are several other business firm also who
are selling same products. As they have high threat of substitute product but
threat from each other will get reduce after their merger.
 Threat of new entrants – Sainsbury's and Asda will have low threats of new
entrants because within retail market 69.8% of grocery market share is controlled
through big four. Although, retail sector have high competition but after getting
merger they booth organisation will no more competitors of each other (Ioannou
and Serafeim, 2019). Along with this, there is requirement of huge amount for
entering in retail industry. Thus, threat of new entrants for Sainsbury's and Asda
will be low.
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2. Resources and key competences of organisation and identify core competences
VRIO analysis of Sainsbury's and Asda Merger - This is an framework which look
each and every internal resources as well as also assess one by one to find out that
they are providing sustained competitive advantages or not (Nithisathian and et. al.,
2018). In simple term it can be said that, resources analysis conduct to identify whether
they are offering sustained competitive advantages competitive advantage, has an
unused competitive advantage, temporary competitive advantage, competitive parity or
competitive disadvantage.
Resources Value Rare Imitable Organised Advantages
Financial
Resources
Yes Yes No Yes Long term
competitive
advantages
Local food
products
Yes No Yes No Temporary
competitive
advantage
Employees Yes Yes Yes No Temporary
competitive
advantage
V- Valuable
 VRIO analysis of Sainsbury and Asda merger reflect that for them financial
resources are more valuable as after getting merger financial resources will also
get increase which help them in investing with external available opportunities. In
addition to this, through merger they will also get assist in combating with threats
available in external environment.
 Both Sainsbury and Asda sell local food products after getting merger their foods
will also get more valuable because they will get highly different. Along with this,
there merger will also assist in attracting customers and help in gaining
competitive advantages.
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 Sainsbury and Asda for are well known organisation of retail sector and their
customers are also satisfy which show that their employees are well trained. If
these will work together then result in gaining productive outcomes.
R- Rare
 Financial resources of Sainsbury and Asda merger are founded rare as in
respective sector resources are possessed through some business firm.
 Local food products are not rare of Sainsbury's and Asda because these are
provided in market easily through several other competitiors (Brooks, Chen and
Zeng, 2018). After getting merger level of competition for both organisation get
reduce but other competitiors are also using these resources in same manner
like Sainsbury and Asda for gaining competitive advantages. Thus, local food
products are valuable and it still using these resources.
 Employees of Sainsbury's and Asda are rare resources that have been
determined by utilisation of VRIO model. Both of the organisation have well
trained employees which after merger help in gaining more competitive
advantages.
I-Imitable
 By VRIO analysis it has been identified that financial resources are costly to
imitate. Respective resources are acquired through Sainsbury's and Asda by
prolonged profit over the years. Along with this, competitors and new entrants
also need same profit for long term to gain this amount of fiscal resources.
 Local food products are not expensive to imitate which has been identified
through VRIO analysis.
 Staff members of Sainsbury's and Asda are not costly to imitate because other
companies of same sector can also provide training session to their employees
for enhancing their skills. Along with this, competitors can also hire employees of
Sainsbury's and Asda by offering them better package, growth, working
environment and other benefits.
O- organisation
 Sainsbury's and asda financial resources are organised for capturing value which
has been identified by using VRIO analysis.
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 Patents of respective organisation are not organised in proper manner which
simply means that sainsbury's and Asda is not using their patents at full potential.
TOWS Matrix
Strength – It involve positive aspects of an business firm, that reinforced position of
Tesla in becoming most dominant organisation at global level. Strength involves factors
that are believed as stronger point of Sainsbury's and Asda Maerger as it make sure
profitability of company, popularity, expansion with long term. Below mention are
strength
 Right expansion moves – It is one of the biggest strength of Sainsbury's and
Asda merger as from small grocery store brand expanded to convenience store
which later on become supermarket. That deals with numerous merchandise
category which help in fulfilling daily basis needs of customers. Sainsbury's and
Asda are top supermarket brand within United Kingdom.
 Opportunity to cater all type of customers – Sainsbury's and Asda is offering
their products for every type of customers while their value products are for
economic segment (Keyes, 2016). There are several branded as well as
expensive products which higher segment customers are looking for.
 Innovative promotion strategies – There are several promotion strategies
which merger of both company is adopting and they are highly innovative as well
as they pitch brand direct against their competitors. For instance, brand match
promotion within this each and every product sold by Sainsbury's will compared
with other competitive company like Tesco and Aldi this type of practices
indicates that they are cheapest.
Weakness – along with strength every organisation have some weakness also
same as merger of Sainsbury and Asda also have. Thus, there are some shortcoming
of respective company's organisational structure that result in reducing its growth and
competitiveness. Explanation of these are as follows :-
 Brand Switching – Same as other retail brand Sainsbury's and Asda merger will
also facing lot of risk from brand switching. After conducting promotional activities
as well as loyalty programs (Puranam and Vanneste, 2016). Respective merger
is still finding difficulty in retaining their customers for long duration.
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 Low Margin – With increasing level of competition in retail sector and risk of
online retailers there are several retailers who lost their sales volume. For
attracting more and more customers Sainsbury's and Asda cut down their cost
and keep price of products lower in comparison of competitors which will sustain
no longer.
Opportunities – It is exploitable set of circumstances with several unsure results,
explore to risk and necessitate commitment of resources. Opportunity is external factor
for Sainsbury's and Asda which assist in improving its performance, strategic growth,
management structure and many other aspects. Opportunities of both merger company
are as follows :-
 Business expansion – Sainsbury's and Asda merger have several opportunities
in relation of expanding their presence at global level mainly in emerging
economies such as India, China, Brazil and many more. Because these nation
have large working population and they provide wide market to companies (Dahl
and Fløttum, 2019). In addition to this, countries which have fast growing
economy will provide plenty labour to company who are setting their business at
low cost. This will result in reducing production cost of company which result in
selling their finished products at low price and able to attract more and more
customers. As they will be able to minimise several expenditure which help them
in investing more in opening outlets. This would assist them in grabbing more
and more customers on global level as well as it also enable Sainsbury's and
Asda in gaining competitive advantages in term of high market share.
 Emerging market – It also work as opportunity for Sainsbury's and Asda Merger
because emerging market have potential customers who has rising disposable
income which will boost their affordability. Thus, establishing stores in emerging
market result in increasing demand of such products within population and result
in adding profitability of business.
 Digital marketing – It is also an opportunity for Sainsbury's and Asda merger as
they can also facilitates customers through online shopping (Oppenheimer,
2019). As it will help customer who have mobility issue by providing flexibility to
them as they can purchase daily needed products by sitting at home.
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Threats – These are the phenomenon that stop organisation in taking advantages of
benefits which derived from availability of strength. There are few threats which
Sainsbury's and Asda merger will face for maintaining business from unpredictable
market condition. Explanation of threats in relation of both organisation merger are
as follows :-
 Competition – It is major threat for Sainsbury's and Asda as they are facing high
competition like all other organisations. Mainly with the companies like Aldi and
Lidl who are offering competitive quality product with discount rate (Cappa,
Cetrini and Oriani, 2019). Along with this, in United Kingdom cost of living is high
which force people to reduce their spending. It is one of the rising threats in an
organisation which can create a deadly impact over the survival of an
organisation in a bigger market and also over its emergence in it. This impacts
over various other aspects and growth of an organisation. Sainsbury and Asda is
an biggest chain of supermarket. It is going to be impacted because of this as
increase in competition leads to increase in substitute availability which creates
various preferences for an customers that automatically shifts the customers.
The company is going to be effected negatively as it has to face loss of money
and brand value loss as the substitute company like RESCO, ALDI and LIDL is
going to capturing its market.
 Shortage of skilled workers: Work Force is an important factor in any company
as it provides services to the customers and performs task given by the mangers
(Espahbodi and et. al., 2019). Sainsbury and Asda merger is a developed and
large entity who gives quality to the customers. If the workers reduces then it
results in reductions of quality services leads to decrease in quality of customers
and ultimately growth of profit reduces.
 Changing of environmental laws; AS the change in these law result in
reduction of usage of raw materials that effects the selling of various products.
Sainsbury and Asda is going to be effected because of this as availability of
certain product may fall in shortage which results in los in selling of these
products.
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 Liability laws: These laws differ from country to country and this may lead
to various kind of changes regarding claiming of liabilities (Ntene, Azasu
and Owusu-Ansah, 2020). Sainsbury and Asda merger may have face lot of
claims regarding products sold by it which may happen because of the
changes in policies of caliming compensation.
Strengths
 Right expansion
moves
 Opportunity to cater
all type of
customers
 Innovative
promotion
strategies
Weakness
 Brand Switching
 Low Margin
Opportunity
 Business expansion
 Emerging market
 Digital marketing
SO Strategies
 Increase market for
attracting
customers to spent.
 Using digital
marketing and
attract customers
towards merger.
WO Strategies
 Digital marketing
provide better
services to
customer’s which
result in low brand
switching.
 Emerging market
and business
expansion strategy
of merger result in
increasing margin
of company.
Threats
 Competition
ST Strategies
 Innovative
WT strategies
 Bring innovative
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 Shortage of skilled
workers
 Changing of
environmental laws
 Liability laws
production help
merger in
sustaining within
competition.
 Training and
development
session provided to
employees make
them skilled.
products.
 Provide training
and development
session to
employees for
becoming more
skilled.
3. Strategy Evaluation
Strategy evaluations will going to discuss merger of Sainsbury's and Asda for
gaining competitive advantages within retail industry (Sainsbury’s and Asda to operate
‘dual-brand strategy’ in merger that creates new supermarket leader, 2020). SAF Model
will utilise for strategy evaluation, here it stands for suitability, feasibility and
acceptability. Explanation of these are as follows :-
 Suitability – Merger of Sainsbury and Asda is suitable as it help in gaining more
competitive advantages because these both organisations are of same sector as
well as comes under top companies of retail sector. Thus, merger of both
organisation will be suitable for retail sector in their point of view.
 Acceptability – Merger of Sainsbury's and Asda is acceptable because they will
create new supermarket leader of retail sector. Along with this, respective merger
is acceptable by customers also because company will come with huge products
as well as offers in market area for serving existing and potential customer's. In
simple term it can be said that, if merger will be acceptable by company then
they will enhance customer base which result in generating high revenue. But in
relation of government bodies merger of Sainsbury and asda is not acceptable as
they are leading companies of retail sector if both will get merger then result in
wide impact on sales of other companies available in market.
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 Feasibility – This merger deal is within 2nd and 3rd biggest supermarket which will
create combined network for approx. 2800 Sainsbury's, Asda and Argos stores. It
will equate to approx. 31 percent share of supermarket sector, ahead of current
market leader Tesco on 28%. Thus, for both the organisation merger will be
beneficial as it will provide them assistance in serving their customer will more
innovative product at good prices by working together.
CONCLUSION
From above discussion it has been summarised that, corporate strategy
influence how an organisation create values which simply means that it cover both
product portfolio and assumptions i.e., resources as well as organisational aspects. In
addition to this, it is essential for company to analyse both internal and external factors
because it will provide assistance to them in identifying strength, weakness, opportunity
and threats. Along with this, industry analysis is essential for company which will
conduct by using porter's five force model. All these are necessary because business
environment is dynamic in nature and need to be evaluate in effective manner.
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REFERENCES
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Online
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SWOT Analysis of Sainsbury's, 2019.[Online].Available
through<https://ezinearticles.com/?SWOT-Analysis-of-
Sainsburys&id=9484952>
Sainsbury’s and Asda to operate ‘dual-brand strategy’ in merger that creates new
supermarket leader, 2020.[Online].Available
through<https://www.marketingweek.com/sainsburys-and-asda-agree-merger/>
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