Business Essentials: Sainsbury's Market Position and Competitive Advantage

This report explores the essential elements of business and their contribution to Sainsbury's market position and competitive advantage. It discusses Porter's Five Force Model and the functional areas relevant to Sainsbury's. The report also evaluates Sainsbury's market position in the UK retail sector.

Busines
s

Essenti
als

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Overview..................................................................................................................................1
2. Porter’s Five Force Model.......................................................................................................1
3. Functional area that relevant to the organizations’ competitive position................................4
4. Market position of Sainsbury’s................................................................................................5
CONCLUSION................................................................................................................................6
RECOMMENDATIONS.................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
A business is described as an entity or association engaging in economic, manufacturing, or
technical activities. The term "business" also indicates the individuals' managing efforts and
practices to produce and sell, for gaining profit on goods and services (Anderson. And et.al.,
2020). Business essential elements also include the components which make a contribution to a
company' successes or failures. Know about company strategies, templates and the key factors
for growth. Financial reporting, accounting, human capital administration, communications,
project management and effective are important aspects of business essentials which provide
success to achieve organizational goals & objectives. Sainsbury Company is selected for the
better understating of the concepts. This assessment covers the several topics such as one
framework for that helps in measure competitive advantage and functional areas which shows
the competitive position.
MAIN BODY
1. Overview
Sainsbury's is Britain's 2nd largest retail supermarket chain, with a 15.4 % market share in
the grocery sector in 2019. Company introduced in 1869 and they has first store in Drury Lane
and introduced by John James Sainsbury, London, in 1922 business has become biggest grocery
retailer (Chahal, Jyoti and Wirtz, 2019). While waiting merging with Asda in April 2019,
Sainsbury's was once again relegated to 3rd spot as the rival company placed 2nd. In 2007,
Sainsbury's revealed intentions to move from Holborn to Kings Cross its Shop Support Center.
The new location would be part of a growing complex, allowing cost savings as well as
efficiency. Such savings will also be decided to make by using cost effective building supplies
and design, a heat and power center including the use of renewable energies. Sainsbury's joined
talks with Walmart in 2018 regarding a merger agreement with Asda, that could be the UK's
largest grocery store firm. Wal - mart will own 42 per cent of the acquirer company underneath
the proposals, that would be helped lead by Sainsbury's current chief executive, Mike Coupe.
The team also would open Argos outlets in Asda 's stores.
2. Porter’s Five Force Model
It is a framework which is used to examine the competitive advantage of an entity. The
rivalry of an organization, possibility of new entrants to the industry, suppliers, customers and
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substitutes will impact the overall profit of a business. By using this framework, Sainsbury’s able
to evaluate their competitive advantage with different aspects. It help the managers to formulate
their strategies accordingly or try to minimise the threats from outside parties and take
advantages which helps in maximising profit margin or overall performance. These five forces
discussed below in context of Sainsbury’s Company.
Power of Buyers: Because of the wide accessibility of similar products & services, other
firms such as Asda, Tesco, Lidl, Iceland, Aldi, WM, Morrisons etc. which offer substitute goods
at related costs, Sainsbury’s clients have high power of bargaining (Khodaei and Ortt, 2019). It
minimise the risk of substitution products & services that allows consumers to select from rival
products in almost the same price category. British buyers tend to be loyal for price rather than
for particular brands, and because of that they have flock missing from a Big Four to Aldi and
Lidl during the last few years. In the retail sector of UK, customers has high bargaining power so
Sainsbury’s need to formulate a broad client base. That will be possible in different ways.
Bargaining power will offer the company with an ability to simplify the distribution and
manufacturing processes. By shifting towards innovation of new products help the organization
to gain more buyers. Consumers also focus on those products which has discounts and offers on
existing goods and if Sainsbury wants to develop new products then customers ' purchasing
power may be reduced. Additionally, new product lines will decrease the betrayal of current
Sainsbury's customers to their competing companies.
Power of Supplier: Traditionally, suppliers of UK's supermarket have low power of
bargaining due to the availability of several suppliers in the retail industry. Non-compliant
suppliers can be easily replaced by suppliers, which allow the supermarkets such as Sainsbury
the power to obtain suppliers' products at the possible lowest prices to enhance their profit
margins, resulting in losses on the suppliers' side. By having multiple distributors, it builds
effective supply chain management (Klein, 2018). By conducting experiments with developing
products is using several resources in such a way, if prices increase from one raw resources then
the business can move to the next. Company should try to develop consistent delivery which is
based on the client. One point that Sainsbury can draw from Wal-Mart and Nike is that certain
firms created third-party retailers whose reputation is solely dependent on them, thereby creating
a scenario in which these third-party vendors have far less bargaining leverage for example Wal-
Mart and Nike do.
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Threat of Substitute: This competitive force is threat for every sector organization and in
context of Sainsbury, substitute threats are very high. It is happen because of the available food
substitutes for Sainsbury can arrive from retail outlets in other marketplaces that can offer
customers not only meals and beverages directly, but it also offers several other non-food items
such as electronics, clothing, furniture etc. Those may include convenience stores and non food
retailers of both size and delivery to compete of Sainsbury's. Such businesses include Primark,
BHS, Fraser’s House, and Debenhams etc. In order to reduce the threats of substitute,
Sainsbury’s need to becoming more consumer focused instead of product focused. Also
recognizing the consumer's needs, basic desires and preferences, instead of what the consumer is
orders by through the cost to the consumers to turn.
Competitive Rivalry: Selected company faces strong rivalry from their competitors
fellow who are like Tesco, Asda, and Morrisons which really deliver similar goods such as food
items, beverages item, clothing , electronics, etc. at a moderately similar cost making good or
service having switched low costs, so a consumer can easily shift to other lower retail prices
(Kurniawan and Yun, 2018). This leads to cut-throat price battles, aggressive retail ads and retail
creativity, especially within the "Big 4." However, Sainsbury faces heavy competition including
German discount retailers Aldi and Lidl offering up to 40 percent discount on the goods that has
significantly influenced the share of the market of Sainsbury. This pressured Sainsbury's to
attempt and merge with their competitive firms such as Asda to stay alive in the UK food
retailing market to give competition to other rivals. In order to minimise the rivalry company
should establishing sustained differentiation and building economies of scale so it can remain
competitive more effectively.
Threat of entry or Barrier: This would be interpreted as a low threat for Sainsbury's
regarding new entry due to consumer market structure in which 69.8 per cent of the market share
is secured by the 'big four' (these are the large retail sector companies) supermarkets. There is
massive competition among other small supermarkets such as Aldi , Lidl, Iceland,
Waitrose trying to increase its market share that would not offer room for a new participant to
survive. Therefore, any potential entrant will have to sell extremely high-quality goods at very
cheap prices to draw buyers away from the low-cost giants Aldi and Lidl which now deliver
products with price cuts of 40 percent relative to their competitors (Loya and Siegel, 2019). At
the present time, the intensity of rivalry has decided to make the UK food retail sector very
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undesirable that further discourages entry. By having new goods and services innovated,
Sainsbury's able to give strong competition because new products not just to introduce new
customers into the fold and moreover give old consumers a choice to purchase products from
Sainsbury. By developing economies of scale and the variable cost of production can be reduced.
Management should expand their capacity and having to spend money on R&D. New entrants
are less likely to reach a crowded environment where the criteria are continuously determined by
the major players like Sainsbury. This significantly minimise the likelihood of outstanding sales
for the existing companies and hence discourages potential market entries.
Above discussed framework help the managers of Sainsbury to minimise bargaining power
of their buyers by introducing new product range with some differentiation that helps in maiming
overall demand.
3. Functional area that relevant to the organizations’ competitive position
In an organization, different functions area perform different task and it will help the
organization to enhance competitive position in the market which they operate. In relation to
Sainsbury Company, there are several functions areas such as human resources, marketing &
sales, operations, finance & accounting, supply chain etc. Some of them discussed below in
context of Sainsbury’s competitive position.
Human resources: The function of the Human Resources would be to suggest the results
on if their company has a historical perspective on HRM approaches that will hopefully direct
them towards successful corporate priorities and targets, with workers at the core of the business
goals (Min, 2019). It's often essential that now the HR with a constructive workflow can hire
efficient and qualified people in the organizational premises. In addition, the value of Human
Resource department for Sainsbury would be representative of producing more manpower across
each division and tying skilled people through recruiting and selection procedures to accomplish
real-time operational priorities and objectives.
Employee motivation is the another essential feature of human resources functional areas,
can be defined as the most efficient way to create strategic steps, as workers inspired by training
and development initiatives can be successful in order to boost their efficiency and make them
work efficiently within the corporate culture or able to achieve business goals & objectives. If
the staff members are not very well sufficiently motivated and perform below a decent standard
then the company suffers in meeting its goals and objectives. But if the workers are interested in
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working at a sufficient degree then Sainsbury's will succeed in their goals and goals. That's
why Human Resources Department is essential to Sainsbury to manage their manpower.
Marketing & Sales: This functional area involves multiple business responsibilities and it
also responsible for company's growth. Marketing function has main roles and responsibilities
are analysing market and then build marketing or promotional strategies accordingly to attract
maximum consumers. Marketing and sales strategy allows Sainsbury to target its limited capital
on the greatest ways to increase revenue and gain a strategic edge that is sustainable. Sainsbury's
is attempting to convey that they could not only produce excellent quality at reasonable rates but
they are also the only store that offers such a variety of ideas. They plan to attract all prospective
customers (Muller, 2019). Sainsbury using several ways of promoting their products among the
customers such as T.V advertisement, Radio, Social Media advertisement, campaigning, digital
marketing of their products, discount strategy etc.
4. Market position of Sainsbury’s
Below mention graph provide better understanding regarding the market position of
Sainsbury’s Company in the UK’s retail sector.
Figure 1 Market Shares, 2019.
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Above statistics shows the market shares from 2012 to 2019, it was observed that market
share of Sainsbury Company is continuously decreases (Market Shares of UK’s Supermarket,
2019). This report considers the last five years data to evaluate the position of organization in the
retail sector. In 2015, market share of Sainsbury was 16.3% which reduces to 16.1% in next year.
Similarly, market shares of 2017, 2018 or 2019 were 15.8%, 15.5% and 15.4% respectively.
Market position reduces because of its competitors but it was also observed that market share of
Tesco also reduces, but Aldi or Lidl both companies market shares yearly increases because of
their effective performances.
CONCLUSION
On the basis of above report, it has been concluded that business essentials include several
activities or practices which support the organization to achieve competitive advantages, By
using porter’s five force model, organization able to identify the bargaining power of their
buyers and suppliers, it further leads the managers to formulate such strategies which helps in
reducing their bargaining power or make their present more stronger in the retail market.
RECOMMENDATIONS
From the above discussion it has been recommended that Sainsbury Company should
introduce new product range which some unique features which make their products different
from their competitors. In addition, they need to think about merger with Aldi or Lidl because
they are small competitors but their performances as well as market throughout the years
continuously increases. Merger helps the Sainsbury to increase their market share and customer
base which automatically increases the demand or production which leads to maximise the profit
margin or overall performance.
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REFERENCES
Books & Journals
Anderson. And et.al., 2020. Essentials of modern business statistics with Microsoft Excel.
Cengage Learning.
Chahal, H., Jyoti, J. and Wirtz, J., 2019. Business Analytics: Concept and Applications.
In Understanding the Role of Business Analytics (pp. 1-8). Springer, Singapore.
Khodaei, H. and Ortt, R., 2019. Capturing dynamics in business model frameworks. Journal of
Open Innovation: Technology, Market, and Complexity, 5(1), p.8.
Klein, L., 2018. Business Excellence. Springer Fachmedien Wiesbaden.
Kurniawan, A. and Yun, Y.U.N., 2018. Relationship Between Business Competence and
Business Survival of Culinary Business in Bandung. Mimbar: Jurnal Sosial Dan
Pembangunan, 34(1), pp.147-157.
Loya, R. and Siegel, S., 2019. Business Automation Essentials for the Nontechnical Professional.
In Business Automation Essentials for the Nontechnical Professional. De Gruyter.
Min, H., 2019. The essentials of supply chain management.
Muller, M., 2019. Essentials of inventory management. HarperCollins Leadership.
Online
Market Shares of UK’s Supermarket, 2019. [Online]. Available Through:
<https://www.statista.com/statistics/300656/grocery-market-share-in-great-britain-year-
on-year-comparison/>
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