Evaluation of Corporate Strategy using SAFE Criteria

This article evaluates the corporate strategy of Sainsbury using the SAFE criteria. It assesses the strengths, weaknesses, opportunities, and threats of the organization and discusses its resources and unique capabilities. The evaluation is done through a SWOT analysis and VRIO analysis. The article also discusses the merger strategy of Sainsbury.

Applied Corporate
Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Assessment of external analysis of business environment and industry.....................................3
Identify and discuss organisation’s resources and unique capabilities........................................7
Evaluation of corporate strategy using SAFE criteria...............................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Corporate Strategy encompasses set of hierarchical course of actions or plans that justify
long term corporate goals and objectives (Corporate Strategy. 2016). This corporate strategy
describes vision of an organisation that provide direction to sustain its competitive edge.
Moreover, it explain overall value, culture, set strategic objectives of organisation. It justify
fundamental framework of plan which describe what to be attain and how to be achieved.
Corporate strategy is an on-going process which enables organisation to modify itself according
market situations or conditions. Sainsbury is one of second largest chain of supermarkets within
United Kingdom. It is largest trading and Retail Corporation which deals in wide range of
consumable goods. Sainsbury is big organisation which is divided into three segments that is
Sainsbury’s Supermarkets including convenience shops, Sainsbury banks and Sainsbury’s Argo.
Company has its headquarters situated in London. Company has more than 1415 physical stores
across UK. Sainsbury has wide product portfolio which includes Hypermarket, supermarket,
convenience shop, forecourt shop etc. This research report contains brief information associated
with external analysis of business environment around which following organisation operates its
business and describe how these factors create opportunities and threats. It justify industrial
analysis in which company is incorporated. Moreover, it justify internal capabilities of
organisation by analysing its resources.
MAIN BODY
Assessment of external analysis of business environment and industry.
External analysis is associated with study or examination of Macro environment which
includes such factors that have ability to influence or shape organisational behaviour and its
operations. These factors bring various opportunities and threats along with them. These
opportunities enables organisation to achieve its competitive edge effectively and threats creates
many hurdles to achieve its objectives and goals (Rugman and Verbeke, 2017). Sainsbury is one
of flourish and well establish organisation and it is important for its management to conduct
regular research in order to gather relevant information of market trends. Such information
enables organisation to operate its business units according to requirements and developments of
market. Proper utilisation and analysis of these factors helps firm to act as first mover and take
advantage of opportunities before its rivalry firm.

PESTEL ANALYSIS IN CONTEXT OF SAINSBURY
Pestle analysis justify as framework or method to monitor various elements which are
associated to macro environment and has negative or positive impact over performance of
organisation. Present business environment is influencing whole UK retail market and this
business environment is comprises of two sub-environment macro and micro (Puranam and
Vanneste, 2016). Today, UK is facing various challenges due to Brexit, Corona outbreak and
many other reasons which bring immense impact over operations of retail organisations.
 Political: these factors are highly associated with government intervention, political
environment which influence the entire economy or certain industry. Presently, UK is
facing adverse political impact over its economy and retail industry due to Brexit and
Corona outbreak uncertainty. Brexit referendum is an agreement in which Britain voted
to get separated from European Union. This bring immense impact as it increases import
and export policies. This act as Threat for Sainsbury as company faces many difficulty to
affordably import its products from abroad. Along with this due to Corona crises it
impact over company’s demand and supply of its products (Bereskin and Hsu, 2016).
 Economical: these factors are associated with economic conditions, policies and systems.
Currently, UK has instable economic situations due to Brexit and other global
uncertainties which brings enormous impact over its production, prices, transport, income
of consumers. It creating threat for Sainsbury operations as company is highly reliable on
transporting its products through road based transport across UK and due to high increase
in fuel charges may affect its sales in market.
 Social: these factors are associated with socio culture, taste and preference of consumers.
UK has diversified socio cultural environment with large population. In present scenario,
citizens of UK are highly inclined towards healthy and diet food items as they are getting
highly conscious regarding organic and natural products. This brings enormous
opportunities for firm to enlarge its brand extension by developing and producing new
organic products to cater requirements of its consumers. Also, firm can expand its
business to other countries also (Pyles, 2016).
 Technological: these factors are related to advanced technique of production and
distribution of goods to its end-user. UK has advanced technical hubs which facilitates
immense opportunities for retail organisation. Sainsbury embrace technology in many

ways as company has launched its e-commerce online stores which enables it to meet out
demands of tech friendly users. Technology provide opportunities to company as it can
make use of Artificial Intelligence that enables it to determine and understand needs of
customers (Surijah, 2016).
 Environmental: these factors are associated with ecological and climatic surroundings.
UK government, local bodies are taking initiative to reduce negative impact of business
activities over natural environment. Sainsbury is large Supermarket chain which create
immense carbon emissions, air pollution and other environmental conditions. It create
opportunity for firm to take initiative reduce amount of plastic waste, fossil fuel
transportation and so on, this will enhance reputation and goodwill of organisation.
 Legal: these factors are related to legal laws, rules and regulation which are framed by
nation’s government. UK government has introduce new sugar tax law in order to reduce
content by 20% in sugary drinks which brings threat for Sainsbury own brand products.
Also, due to Brexit company might face challenge regarding new trade laws that
influence its internal policies and rules (Ledin and Machin, 2016).
PORTER’S FIVE FORCES MODEL
In order to determine and examine retail industry Sainsbury can utilise Porter’s five
forces model. This model provides framework or tool through which company can assess five
different forces which display degree of rivalry within industry and profitability level of existing
firm. These forces describes structure of industry and how favourable it is for organisation. This
analysis helps firm to formulate effective corporate strategy.
 Industrial rivalry: this force explain degree of competition is existing within industry. If
there is large number of organisation exists then it will hamper power of Sainsbury.
There is high force of rivalry exists in retail industry as company is competing in intense
competitive market where other supermarkets organisations are producing identical
products at affordable prices. Such companies are Tesco, Asda, Morrisons which are
providing cut-throat competition (Frandsen and Johansen, 2018).
 Threats of substitution: this force is associated with degree of similar products are
available in market. Impact of this force is high as there are many other organisation
which are offering identical product range at cheap or affordable prices. This provide

options to customer to switch over others products. This hamper profitability of
Sainsbury.
 Threats of new entrants: this force is associated with intensity of entry of new
organisation with new products in industry. Impact of this force is Low as half of retail
market share is hold by large retail organisation that is Sainsbury, Tesco, Asda,
Morrisons. It is difficult for new firm to enter as they have to invest high capital to
establish as well as offer innovative products at affordable products to attract large
customer base (Menghua, Yongfang and Guanglin, 2017).
 Buyer’s Power: this force is associated with ability of consumers to bargain or take down
prices of products offer by producer. Impact of this force is relatively high as Sainsbury
has large customer base. Secondly, availability of substitutes increases buyer’s power as
they can easily switch to other competitor’s product if they are highly price sensitive.
 Supplier’s Power: this force is related to power of dealers in which they charge high
prices for raw material. Impact of this force is relatively low as there are large number of
suppliers exists in retail industry who produce similar raw products. So power of
bargaining lies with Sainsbury as company can negotiate over prices.
Identify and discuss organisation’s resources and unique capabilities.
Internal analysis comprises of study of internal environment of organisation with contains
its financial and physical resources, corporate culture, objectives, vision and mission statements,
long term policies, corporate social responsibility and so on. Company has control over such
environment as it can modify it according prevailing changes due to external trends. These
surroundings represent inner and unique capabilities of firm which enable it to attain as well as
sustain its competitive edge. To understand its inner capacities and core competencies Sainsbury
can make use of SWOT Analysis and VRIO analysis models (Landreth, 2016).
SWOT ANALYSIS MODEL
SWOT represents strength, weakness, opportunities and threats of an organisation.
Before formulating any corporate strategy it is important for firm to analyse its core abilities and
areas where it is weak. It is an appropriate way to examine positive and negative components
with this model and identify how it can compete effectively within large market. Sainsbury is a
large retail organisation which has several strengths and opportunities to flourish its business at

large extent. On contrary, company has weaken image in different areas which create situation of
threats that hamper its productivity and profitability. Some of them are explained below:
 Strengths: these are characteristics which exists inside of an organisation that provide
advantage over other competitors. Sainsbury has several strengths which enables it to
build and enhance its brand image in target market. Company has strong brand name as it
is one of older supermarket chain in UK and enjoys large pool of loyal customers.
Company has wide market area as it owns more than 1400+ physical stores across UK
and provide quality products at affordable prices (Schmidt and Redler, 2018). Through its
wide range of products it meet out demands of all class of consumers which generates
brand loyalty. Also, through its online sales company has created higher profits.
 Weakness: these are such attributes which are negative and influence operations of
business. Sainsbury need improvements in some areas of business. Such as company has
it business outlets in only UK that reduce range of customers in local market as compare
to other retail organisations. This generates chances for consumers to switch other brands
also. Sainsbury is facing stiff competition from online retail organisation due to which
company is selling its products at lower prices that generates lower margins.
 Opportunities: these factors or elements are exists in external environment through
which company can foster its competitive advantage. There are various opportunities lies
for Sainsbury by taking advantage of these company can increase its return. Company has
immense opportunity to enlarge its business in different countries. This enables firm to
expand its market globally. Also, firm can produce diversified more products to its large
customer base (Sari and et. al., 2018).
 Threats: these elements are present in external environment which causes trouble and
hamper productivity as well as profitability of business projects. Major threats of
Sainsbury is intense rivalry with top competitors like ASDA, TESCO, Morrisons which
are offering identical products. Also, other discounted firm like Aldi, Lidl who are
indulge in offering goods at very low prices. Uncertainty of Brexit is creating many
threats.

VRIO Analysis Model
VRIO analysis framework justifies the process of evaluating effectiveness of company’s
resources which enables it to attain its competitive edge. VRIO represents different
evaluation dimension that is Value, Rareness, Imitability and Organisation. Sainsbury has
different resources which creates unique capabilities that are highly interrelated with its
competitive advantage (Andersen and Andersson, 2017).
RESOURCE VALUABLE RARE IMITABLE ORGANISATION
Financial resources YES
Human resources YES YES
Brand Image YES YES YES
High customer
loyalty
YES YES YES YES
 Valuable resources are those which enables firm to improvise its efficiency and
effectiveness in terms of taking proper advantage of external opportunities. According to
VRIO matrix, financial resources are consider as valuable for Sainsbury as these
resources helps out firm to make investments in various projects in order to earn higher
returns. Also, with help of sufficient finance company can able to expand its business in
other countries.
 Rare resources are those which cannot be acquire by many firms unless one or two
organisation. On basis of VRIO Matrix, human resource are consider as rare as company
has more than 150000 employees who has effective interpersonal skills and are highly
qualified. These resources enables firm to achieve its objective of enhancing customer
experience and satisfaction (Schmidt, 2015).
 Imitable resources are those which cannot be copy or imitate by other organisations.
According to VRIO matrix, Brand image of Sainsbury is consider as imitable resources
as company is one of the oldest retail organisation and owns huge number of outlets
across UK. These resources enables firm to achieve and sustain its competitive
advantage.
 Organisation refers to inner capabilities of organisation to make proper utilization of
resources and create value from them. According to VRIO matrix, high customer loyalty

is consider as organised resource for Sainsbury as company provides high quality
products at affordable prices which attract high customer base. This enables firm to
compete with other retail organisation effectively and efficiently (Berning, 2016).
Evaluation of corporate strategy using SAFE criteria.
Merger strategy refers to such corporate strategy that justify as combining resources of
two companies into one organisation with purpose of improvising its financial as well as
operational strength of both organisations.
Sainsbury is second largest retail organisation across UK and serves wide variety of
consumable products to its million customers. Recently, company make announcement of getting
merged with ASDA. This corporate strategy implemented to cater changes associated with
lifestyle, size, diversity of households, technological advancements and so on. Both retail
organisation are taking unified attempts in order to effectively react against external change. This
strategy is implemented to reduce cost expenditure and offer their products lower prices as well
as maintain customer value for each organisation. Main purpose of this merger is to meet out
demands of customer in present and future (Asda-Sainsbury's merger, 2020). Another objective
of this merger strategy is to attain cost savings, enlarge customer base by providing quality goods
at lower prices. In addition to this, to make investment in value, quality, range of
product/services and to make more convenient shopping experience for customers.
SAFe Criteria
It is important for firm to evaluate its corporate strategy in order to identify that at what
extent it is suitable, acceptable and feasible in market. This evaluation criteria enables firm to
assess whether it is successful or not. This refers to strategic alignment that can be attain by firm
through controlling, monitoring moves associated with business strategy. SAF represent
suitability, acceptability, feasibility.
 Suitability: this is prime component of this criteria which is highly concerned with
whether implemented strategy cater or meet out key problems associated with strategic
position of an organisation. This component analyse at which extent implemented
strategy is fit in identified situation and how much it enhanced its competitive edge.
Sainsbury and ASDA merger is suitable in terms of growth expansion. Through this
strategy company make itself more stronger and competitiveness. This enables Sainsbury

to establish high standards for other large retail organisation such as Walmart, German
supermarket, Amazon.com and others. Linking with ASDA will give more buying power
to Sainsbury which secure better deals with suppliers. Also, this enables Sainsbury to
invest in digital innovation (HONG and GUO, 2015).
 Acceptability: this element of criteria explains expected performance results of strategy.
This element evaluate return, risk and stakeholder response associated with particular
corporate strategy. Returns will be determine on basis of benefits that stakeholders expect
from implemented strategy. Sainsbury and ASDA merger is acceptable by its
stakeholders as due this merger company act as unified group and gain combined revenue
of £51 billion. With help of stakeholder matrix it is easy to understand acceptability of
this strategy. Through this strategy company has boost up its network with more than
2800 Sainsbury’s, ASDA and Argo stores across country
Stake holder matrix is a framework of analysing potential changes which are
associated with strategy that provide value to interested parties. This model includes
employees, shareholders, investors, consumers. This model state that corporate strategy is
said to be acceptable when it provides relevant benefits to third parties.
 Employees: this strategy is acceptable as it is beneficial for workers of Sainsbury
and ASDA as they get higher remunerations packages and other benefits. This
provide them opportunities to explore innovative ideas and enhance their
performance. Also, with this merger company can provide chance to talented
candidates and improvise its productivity (Frandsen and Johansen, 2018).
 Investors: through this strategy company can attract and retain its investors as it
can gain higher profits and returns. Company can cater demands of its investors
and provide them effective return on investment.
 Customers: with help of this corporate strategy customer will get wide range of
product range at affordable prices. Sainsbury can able to attract new customer
groups as it offer low prices products in target market. Also, it cater diversified
requirements of different customers effectively and efficiently.
 Shareholders: this corporate strategy enables firm to satisfy various demands of
shareholders by providing them time to time dividends. It brings substantial value
for its shareholders.

 Feasibility: this element refers that whether company has proper amount of resources
and core competencies to implement or deliver strategy in most effective way. In simple
terms, it justify how efficiently in work in practical sense in terms of attain objectives.
This corporate strategy of merger with ASDA is feasible for Sainsbury as company has
required amount of resources in terms of finance, manpower, material, market and so on.
This corporate strategy is feasible as company has attain all its smart objectives such
attaining higher market share, increasing customer base, earning higher profits, attract
more investments. Also, through this company can provide better services and products
from its top competitors (Puranam and Vanneste, 2016).


CONCLUSION
As per above research report, it can be concluded that corporate strategy plays an
significant role in survival of business enterprises. This provide direction to company in order to
attain all its long term objectives. Corporate strategy enables firm to build its long term vision
and mission statement. Corporate strategy helps out business enterprise to cater requirements and
developments of market trends. There are various analytical tools through which company can
assess external factors which hamper its productivity and profitability. These tools are pestle,
porter’s five force model, Swot analysis, VRIO. With these tools an organisation can formulate
effective corporate strategy according external requirements. Moreover, these strategies enables
company to attain and sustain its competitive advantage over its competitors.

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