Applied Corporate Strategy

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Strategic Analysis Report
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1) Carry out external analysis (business environment and industry) to identify 5 (fifth)
Opportunities and 1 (one)Threats and assess industry attractiveness....................................3
2) Analyse the resources and key competences of the organisation and identify core
competences (key factors that may give the company its competitive advantage)................8
3) Choose one strategy that the company implemented recently and evaluate it using SAFE
criteria.....................................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
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INTRODUCTION
In present time, strategic analysis can be defined as an effective process, which may lead
the organisation to understand the behaviour of both internal and external business environment,
in order to take right decisions in specified time frame. With the help of this, organisations can
sustain or expand their business at international level (Formicola and et. al., 2018). On the other
hand, strategic analysis helps in developing a number of strategic plans so that, company could
effectively run it's business in a successful manner. Under this report, organisation that has been
taken into consideration is J Sainsbury plc (Sainsbury's), which was found in the year of 1869 by
John James Sainsbury. It's headquarter is in London, United Kingdom and in April, 2016 Home
Retail Group (Argos) was taken over by Sainsbury's in the amount of £1.4 billion. This
acquisition was done by Sainsbury's in the Month of September (2016). Away with this, report is
going to be enclosed with external analysis, resources and key competences of organisation and
lastly, one strategy that the company implemented for business expansion.
MAIN BODY
1) Carry out external analysis (business environment and industry) to identify 5 (fifth)
Opportunities and 1 (one)Threats and assess industry attractiveness.
In modern time, it has become vital for business organisations to conduct external
analysis, so that they could take the right decisions, understand the attractiveness of industry and
identify both threats and opportunities. In present context, Sainsbury's that already acquired
Argos after winning four-month battle, where the owner agreed with takeover amount £1.4
billion. Sainsbury's has made arrangements purchased Home Retail Group as they have had the
thought of developing themselves as a "multi-item, multi-channel" retailer. Sainsbury's will pay a
blend of offers and money, with Home Retail investors holding 12% of the consolidated business
(Sainsbury's wins battle to buy Argos, 2016).
The arrangement got finished in last quarter of this 2016. Along with this, Director David
Tyler said he accepted the joined business would be "appealing to clients" and make an incentive
for investors of the two organizations. Basically, in the same year, Sainsbury's has faced 11
percent increase in revenues, but pre-tax profits declined around 8.2 percent up-to £503m.
Sainsbury's attributed to “investment in the customer offer” as intense competition contributed to
a price war that has damaged margins across the sector (James, DeSantis and Saur, 2016).
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Pestle Analysis:
Political: Due to Brexit (Eviction of United Kingdom), which is one of the major
political factor, that affected the whole retailing and other industries. In context to Sainsbury’s,
where this political element brought ample number of difficulties for all the retailing
supermarkets to afford import products from abroad. This is where, it is said that increase in the
cost of foreign products would likely be passed onto the end consumer, this move means
Sainsbury’s would require to take ample number of actions so that customer engagement
(continuous spending could be effectively be done by them) can be pushed forward as much as
possible (PESTLE Analysis of Sainsbury’s, 2019).
Threat: During 2016 this factor, raised attention of foreign companies to operate or
expand business in United Kingdom due to open market situation, which resulted rise in
competitiveness for Sainsbury’s even when they acquired Argos, because their revenue was the
only element that increased but not the profit, and instead of this supermarket sales for the full
year fell by 0.6 per cent and later in the next financial year's first month (2017), company was
already signalled to see decline in it's sales (Niu, 2018).
Economical: Rising salaries is being considered as one of specific element within
economic factor that affected retailing industry where different organisations like Sainsbury’s are
performing business. This impacted on both the senses negatively and positively, on business
organisation. If it is talked about supermarkets like, Sainsbury’s then this company has directly
employed a large number of workers to perform simple tasks such as stocking shelves or
manning the checkout. If Sainsbury’s is expected to pay these employees more than ever before,
this will seriously increase their expenses, thus reducing overall profit. As mentioned previously,
this may be counteracted by an increase in the end price of products, but this would be likely to
decrease sales volumes (and thus profitability, indirectly).
Opportunity: Under this, just when Sainsbury's specifically acquired Argos it has helped
company in becoming economically stronger from the existing position, which has resulted in
gaining competitive advantages and in reaching to new heights as well.
Social: In modern time, people has developed a number of trends like healthy eating and
so on. Trends in relation to healthy diet has changed the perspectives and working of different
supermarket chains of retailing industry. Therefore, Sainsbury’s, has also kept it's focus on
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adapting the current change so that consumers’ demands could effectively gets fulfilled in
specified time frame.
Opportunity: If it is talked about 200 of Argos's 845 stores are specifically expected to
close this was generally being taken as one of the crucial advantage or opportunity that
Sainsbury's in hitting a number of targets (Raymond, 2016).
Technological: Acquisition with Agros, Sainsbury’s has started dealing within online
shopping more precisely. This has helped Sainsbury's in reducing the impact of Brexit on
company's sales and profit as well through selling products from all over the world then United
Kingdom. Away with this, e-Commerce and its usage in the food industry are still in early days;
it will be interesting to see how supermarkets get the most out of this growing technology.
Opportunity: Just when acquisition done by Sainsbury's, it has helped company in
enabling it operating 250 digital Argos stores within its branches. Major opportunity that came in
front was that, it led around 200 digital collection points to open Sainsbury's non-grocery brands
in stores this year.
Legal: Changes within rules and regulations is something, which is impacting negatively
and positively over supermarkets of retailing industry. Basically, it has been found that
employment related rules is something, that a government of any country keeps on making
changes, which impacted upon different existing policies made by different organisations like
Sainsbury's, which resulted into bringing appropriate modifications so that to benefit employees
of different workstations.
Opportunity: Primal opportunity that came in front is at the time when acquisition of
Argos, was considered, the United Kingdom's marketing conditions brought ample number of
chances for Sainsbury's to negotiate with the owner of Argos, and this led company to raise
ample number of benefits for itself.
Environmental: Over the years, this factor has been affecting retail industry in different
ways and it has been seen that Sainsbury’s has already kept it's focus on reducing the waste
materials like plastic as this would lead the whole atmosphere to reduce the pollution and
different crisis as well. Sainsbury’s would also require to look for a number of ways through
which they can reduce the waste materials, like delivering a range of incentives to customers
who buy foodstuffs loose and bring their own containers and bags (Segura, Morales and
Somolinos, 2018).
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Opportunity: Primal opportunity that came in front of this factor is that Sainsbury’s
acquisition of Argos has helped firm in conducting business online, which helped them in selling
products across the world, in environmental friendly packaging.
(Sources: What is a PESTLE Analysis?, 2018)
Porter's five forces model for industry attractiveness: Threat of New Entrants: Basically, New Entrants within retail industry focuses on
innovation, which affects working of a business organisation like Sainsbury’s. However,
threat from new entrants is low for Sainsbury's and also, this force can be reduced
through lowering all the reducing costs, pricing strategies, providing new value
propositions to customers. Company, has to manage all the number of challenges &
building effective barriers in relation to competitive edge. This would lead Sainsbury’s to
find a range of industry attractiveness. Bargaining Power of Suppliers: In order to understand the industry attractiveness, this is
another crucial element of Porter's five forces model, where suppliers within retail
industry are holding a dominant position, where they reduce profit margins for
Sainsbury's. It is said that, powerful suppliers in Consumer Services sector use their
negotiating power to extract higher prices from the firms in Retail field. With the help of
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Illustration 1: What is a PESTLE Analysis?

building efficient supply chain with multiple suppliers, Sainsbury's could effectively
sustain within the market for a longer period of time. Bargaining Power of Buyers: With retail industry, targeted market of Supermarket
demands high while paying low or minimal price. Therefore, this high force of clients has
reduced the interest of customers towards products and services offered by Sainsbury's.
In order to improve the same, it will be required by Sainsbury's to increase number of
offers and discounts as well. Threat from Substitute Products: In present time, retail industry of United Kingdom is
already being considered as a sector where, new products and service meets a similar
customer needs, which affected customer base of Sainsbury's. Including this, it is also
needed by Sainsbury's to sustain within the market for a longer period of time, and this
could be done through offering customers with unique and quality based products to
customers (Tian and et. al., 2018).
 Rivalry among the existing players: Retail industry of United Kingdom, basically
consists of Big Four Supermarkets, as they drive down prices in much effective and in
efficient manner. Including this, it is also said that reduction within profitability reduced
the Sainsbury's operating power within retail industry but just when, company acquired
Argos, it mainly gave ample number of benefits to itself and to retail industry as well.
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Illustration 2: Five Forces Model by Porter: Competition and Industry Analysis

(Sources: Five Forces Model by Porter: Competition and Industry Analysis, 2017)
2) Analyse the resources and key competences of the organisation and identify core competences
(key factors that may give the company its competitive advantage).
VRIO: VRIO analysis of Sainsbury's is used in making a detailed analysis of available
resources with a organisation that ultimately lead to gaining of a competitive advantage and help
in long run survival. Over some years Sainsbury's has moved from its core range of other areas
also such as clothing energy & finance, recent takeover of Argos is leading to increasing of
diversity of their portfolios. Sainsbury's, has created a successful brand image by the quality of
products which they offer such that its customer are ready to pay slightly high prices also. In
context of Sainsbury's a detailed analysis is done below:
Valuable: All the resources are valuable for organisation but in case of Sainsbury's after
acquisition of Argos there have been increase in their overall valuable resources possess by this
global organisation. Such as four such resources are brand name, global presence, competent
workforce and large variety of products.
Rare: There are some resources with every organisation that is rare and not found in
every organisation such as in Sainsbury's brand name, large variety of products and competent
workforce are resources that are rare for this organisation (Wall and Young, 2016).
Imitability: This aspect of VRIO model is related with is a particular resource is imitable
by other similar organisations or not. There are some rare resources that cannot be easily imitated
by other competitors in the market. In present case, Sainsbury's posses some resources such as
their brand name and large variants of products are two major resources that will help this brand
in having a differentiation advantage. It is not easy for present competitors of Sainsbury's to
build up such brand image. .
Organisation: All the resources have to be kept organised so that overall functioning is
not getting affected. But some resources are so valuable and at the same time rarely found in any
organisation need to be focused more as these resources help in long run competitive advantage.
Reason behind this is these resources cannot be easily imitated by various competitors also. In
case of Sainsbury's, brand name which they carry because of satisfaction level of present
customers is something that is helping them in having a competitive advantage.
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3) Choose one strategy that the company implemented recently and evaluate it using SAFE
criteria
While expanding business or at the time of gaining competitive advancements, it is
needed by business organisations to develop different range of strategies. Through this, a firm
could sustain within the market for a longer period of time. In present context, organisation i.e.
Sainsbury's has made ample number of decisions in relation to developing strategies so that it
could effectively expand it's business at international level.
This is where, one of the primal decision which was taken into consideration by
Sainsbury's is acquisition of Argos. This decision, which was considered by Sainsbury's where
Suitability, Acceptability and Feasibility (SAF) is specifically taken into consideration and
satisfying these three criteria before it can be successful, and because of this, the use of a SAF
strategy model is a great way to fairly weigh up all the different range of options.
SAFE Criteria:
Suitability: Basically, Sainsbury's was going through ample number of difficulties, which
raised various opportunities as well, for the business organisation. This has resulted Sainsbury's
to gain ample number of opportunities, where it has kept it's focus on acquiring Argos.
Acceptability: This is being considered as one of the crucial risk, that came in front for
Sainsbury's was probability of a strategy’s failure and any financial losses, brand or corporate
impacts should also be weighed up. Risk can be measured by the impact on liquidity, sensitivity
analysis and stakeholder reactions, to deem how acceptable a strategy is. With the help of this,
Sainsbury's could effectively reach to an all new level (Weimer and Vining, 2017).
Feasibility: Feasibility of Sainsbury's strategy that came in front was the specific
aptitude, resources along with the abilities as well, which would lead company to actually
implement different range of strategies that are directly linked with the key to its success.
Considering the situation of the market, Sainsbury's performing break-even analysis, cash-flows
and a range of other financial tests as well.
CONCLUSION
With the help of above mentioned report, it is being concluded that it is vital for a
business organisation to keep on conducting analysis of external environment. This helps
business companies to sustain within the market and to gain competitive advantages as well for a
longer period of time. Considering PESTLE and Porter's five forces model, a company would
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easily assess industry attractiveness. Along with this, acquiring a business organisation can
effectively bring both negative and positive aspects for a business company. Lastly, it is said that
decisions that are made by a company while expanding their business, it is needed for firms to
analyse the situation, trends and different conditions as well that is being carried by targeted
business environment.
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REFERENCES
Books and Journals
Formicola, A. and et. al., 2018. Advancing dental education in the 21st century: phase 2 report
on strategic analysis and recommendations. Journal of dental education. 82(10). pp.eS1-
eS32.
James, B. D., DeSantis, D. A. and Saur, G., 2016. Hydrogen production pathways cost analysis
(2013–2016) (No. DOE-StrategicAnalysis-6231-1). Strategic Analysis Inc., Arlington,
VA (United States).
Niu, H., 2018. A strategic analysis of Chinese infrastructure projects in Latin America and the
Caribbean. BUILDING, p.180.
Raymond, S., 2016. Consciousness and the Development of New Strategic Pathways for
Antiviral Therapy: A Focused Analysis on HIV. International Journal of Sciences:
Basic and Applied Research (IJSBAR). 29(3). pp.146-154.
Segura, E., Morales, R. and Somolinos, J. A., 2018. A strategic analysis of tidal current energy
conversion systems in the European Union. Applied energy. 212. pp.527-551.
Tian, L. and et. al., 2018. Marketplace, reseller, or hybrid: strategic analysis of an emerging E‐
commerce model. Production and Operations Management. 27(8). pp.1595-1610.
Wall, A. and Young, K., 2016. Doubling Geothermal Generation Capacity by 2020. A Strategic
Analysis (No. NREL/TP-6A20-64925). National Renewable Energy Lab.(NREL),
Golden, CO (United States).
Weimer, D. L. and Vining, A. R., 2017. Policy analysis: Concepts and practice. Routledge.
Online
PESTLE Analysis of Sainsbury’s. 2019. [Online]. Available through:
<https://pestleanalysis.com/pestle-analysis-of-sainsburys/>.
Sainsbury's wins battle to buy Argos. 2016. [Online]. Available through:
<https://www.bbc.com/news/business-35941233>.
What is a PESTLE Analysis?. 2018. [Online]. Available through:
<http://academicessayguide.blogspot.com/2018/04/what-is-pestle-analysis.html>.
Five Forces Model by Porter: Competition and Industry Analysis. 2017. [Online]. Available
through: <https://iedunote.com/five-forces-model>.
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