TABLE OF CONTENTS INTRODUCTION...........................................................................................................................3 MAIN BODY..................................................................................................................................3 Impact of macro environment on organization......................................................................3 Impact of micro environment on organization.......................................................................7 Porter five forces....................................................................................................................9 Strategic management plan...................................................................................................12 Increasing quality of products as well as services................................................................14 CONCLUSION..............................................................................................................................17 REFERENCES..............................................................................................................................18
INTRODUCTION Business strategy is predominately the mixture of all decisions which are been taken by organizations as well as actions and activities performed by them for accomplishing long as well asshorttermgoals.Sainsburyisprimarilytherenownedsupermarketchainandretail organization, being established in 1869 by John James. Sainsbury and headquartered in London, UK. This report gives a brief about impact of macro environment on organization, impact of micro environment on organization, Porter five forces and strategic management plan. MAIN BODY Impact of macro environment on organization Micro environment is basically the business environment which consist of various factors as well as components that exists within the organization and hence impacts the overall performance of organization.Macro environment on the other hand, are external factors which influences the functioning of organizations externally and thus affects their decision making. PESTEL analysis PESTEL analysis is basically the framework which helps the organizations to recognize the various external factors which have a great impact on their operations as well as functioning. The major reason behind using PESTEL analysis for assessing macro-environment is that this tool will help in taking effective decisions regarding various factors which are impacting organization in negative way(Lozano, 2018). Political factors The major political factors consists of tax rate, government stability, corruption rate, government policies etc. which has affected the operations of Sainsbury to a high extent. Positive effect Since the emergence of Brexit inUK, the tax has reduced from around 45.6% to nearly 34.2% which has affected the operations of Sainsbury to high extent. Due to this reduction in the tax rate, it has become easier for the company to trade their goods as well as services as much low rate (Amoako and Dartey-Baah, 2020). Thus, this has eventually saved the company from high trade restrictions over international trade (Mohelska and Sokolova, 2016). Negative
Dueto the termination of UK from EU, there has been the frequent change in government which has given rise to political instability in the country. Due to this high political instability, there has been high corruption rate in UK and this has affected the company in negative way. Due to high corruption rate, it has become difficult for the company to comply to various policies and market their products (Brewster, 2017). Economic factors The various economic factors consist of exchange rate, economic growth, disposable income, unemployment rate etc. which has impacted the business of Sainsbury to high extent. Positive effect Due to the impact of Brexit, interest rates in country has been reduced from around 56.3% to more than 43.6% which has been beneficial for the company(Sanaei and Sobhani, 2018). Due to decrease in the interest rates, it has become easier for company to borrow funds and take loans for various purposes like diversification, product development etc.Besides this, because of the decrease in the interest rates, company can now easily take the loans for its various activities at effective rate. (Ardley and McIntosh, 2019). Negative effect According to the report of 2019, unemployment rates in UK has increased from 32.5% to more than 56.7% due to the frequent change in government as well as corruption rate(Mohelska and Sokolova, 2016). This has poses a great challenge for Sainsbury. Due to the high rates of unemployment, company generally has faced the problem in hiring talented staff as well as skilledemployeesfor theorganization.Thishighunemploymentratehascompelledthe company to outsource the other agencies for recruiting and this has increased their overall expense (Remane and et. al.,2017). Social factors Populationgrowth,healthconsciousness,lifestyle,culture,agedistributionall encompasses the social factors that have affected operations of Sainsbury Positive effect Nowadays, more and more people have become health conscious and looks for the food items which are healthier as well as organic. This has provided a great opportunity for company and has been advantageous for it. Due to growing awareness of people for leading healthier life,
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sales of the organic food of the company has eventually increased (Schaltegger, Hansen and Lüdeke-Freund, 2016). Negative effect Due to the increase in growth rate of population, a large number of people does not resemble in their culture and beliefs and thus have a diverse population. This has impacted Sainsbury in negative way. Due to varying beliefs as well as culture of people, it sometimes becomes difficult for the company to follow these beliefs (Pramanik, Maiti and Maiti, 2018). Technological factors The various technological factors which has affected the operations of Sainsbury to a great extent. This consists of automation level, technological innovations, R&D activities, online power of consumers etc. Positive impact Since the advent of advanced technology, people have become more and more aware of the technology and thus looks for the innovative products.The emergence of various advanced technologies like data analytics, Artificial intelligence has allowed Sainsbury to manage teir operations effectively and thus have simplified their work(Amoako and Dartey-Baah, 2020). Negative effect The emergence of technology has also affected Sainsbury in highly negative way. And thus somehow compromised their security. Due to the emergence of wide range of technologies, various security as well as privacy issues has arisen to high extent. Nowadays, hackers can easily hack the computer systems of organizations and steal the confidential information like details of customers, credit card details etc. This has eventually impacted Sainsbury in negative way and due to this, the threat of privacy as well as security has increased.(Lozano, 2018). Environmental factors The major environmentalfactors encompasses weather, climatic change, environmental policies etc. Positive effect The flexible environmental policies of UK has impacted the company in highly positive way and thus have enabled them to contribute towards sustainability. Due to the growing awareness of people towards safer environment, company has increased its contribution towards
sustainability to high level ans this has eventually increased the goodwill of company among consumers. This has also enhanced their brand reputation(Trevisan, 2016). Negative effect The most important challenge which company is facing is increasing demand of the consumers for reducing amount of waste. Today more and more people demand for the minimal waste supermarkets which has somewhat impacted the operations of Sainsbury to a great extent (Morelli, 2018). Legal factors The major legal factors consists of patents, discrimination laws, copyrights, health as well as safety laws etc. Positive effect The positive legal policies witin various countries in which Sainsbury operates generally poses a positive impact on the company. For example- the most recent policy being established by Food retailing Commission reduced the prices of fuels to more than £1.12. This eventually impact the operations of company in great way and thus reduced their overall expenses of trading their goods through numerous transport system (Nayak, Bhattacharyya and Krishnamoorthy, 2019). Negative effect As company operates in more than one country thus it remain exposed to various changing legislation as well as rules and thus somewhere impacts them in negative way.Due to its operation in wide number of countries, company has to remain aware about the constantly changing laws and legislation which sometimes becomes difficult for them(Sanaei and Sobhani, 2018). M1Analysis of macro environment The macro environment basically helps the organizations to assess the various external factors which impacts their overall operations and thus helps them to take effective strategic decisions. The macro environment mainly considers various factors like political, environmental, economical, legal factors etc which impacts the business environment of organization to high extent (Braun, Latham and Cannatelli, 2019). For example- where on one hand, the advent of emerging technologies like AI has made it easier for company to manage their complex work in
a second on the other hand, it has also become a threat for security as well as privacy for company. Impact of micro environment on organization Micro-environment is basically the mixture of various factors as well as elements which have a great impact on the performance and decisions of organization. In short, this consists of numerous factors which are present within organization and directly affects its performance. SWOT analysis SWOT analysis is basically the framework which helps the organizations to analyze their strength as well as weaknesses, opportunities and threats and helps them to asses their coverall performance in the market.The main purpose of using SWOT analysis is that it will help the management of organization to outline the different factors which are contributing or might contribute in their success and factors which are acting as or might act as barriers in future performance of company (Mohelska and Sokolova, 2016).The various factors of micro- environment like competitors, suppliers etc affects the decision-making of organization and thus helps them to evaluate their current position in market. Strength The major strength of Sainsbury is its brand awareness. Talking of the brand name, Sainsbury has established its name in wider markets. This forms its core strength which has enabled it to enlarge its customer base as well as expand in wider geographies. Another major strength of the company is its wide product line. Sainsbury, since its inception has grown its business to a great extent through diversifying in various products line. In theyear 2015, Sainsbury entered into new division which was completely different from its core retailing business, which is financial services and thus established its own bank (Raghunath and Rose, 2016). Weakness The major weakness which has dominated the Sainsbury to high level is low margin. To survive in this cut-throat competition and gain an edge within retail industry, Sainsbury has cut down its costs as well as prices and this has somewhat lowered their overall profit margin. For attracting the customers, company has lowered down its prices and this has impacted their overall revenue. Another weakness that has surrounded the company is brand switching. Sainsbury has switched the brand into various division and thus has faced a lot of risks. Due to
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the increasing switching of brand like inbanks, fuels, energy, company has encountered a large number of risks(Lehmann, 2016). Opportunities Theopportunity which is available to Sainsbury is the growth within rural villages. Sainsbury have its major operation in the developing as well as developed countries. But nowadays, even the people from rural areas have become brand conscious. Thus, this is a major opportunity which is available for Sainsbury to diversify its operations in remote areas or villages. Another opportunity which Sainsbury can avail in order to gain competitive advantage is increasing its investment in R&D and technology. As growing number of people have become technology-oriented thus, company has the opportunity to bring various innovative services in its stores (Goode and Negoro, 2018). Threats The major threat which Sainsbury might face and can be highly detrimental for their operations is the increasing competitiveness within market. Major competitors of Sainsbury are Asda, TESCO, which have a great position in the market(Brewster, 2017).Thus, due to this increasing competition, Sainsbury might face huge brunt. Besides this, another threat which the company might face is the changing legislation of the countries. As company operates in large number of countries thus, it remain exposed to high legal issues (Ghobadianand Hopkins, 2017). VRIO framework VRIO framework is basically the comprehensive tool which helps the organizations to assesstheirinternalresourcesaswellascapabilitiesforfindingwhethertheyprovide competitive advantage or not(Mohelska and Sokolova, 2016). CapabilitiesValuableRareInimitableOrganization Localfood products YesNoNoNo Distribution network NoYesNoNo PatentsNoNoYesNo EmployeesNoNoNoYes
M2 The micro environment helps the organizations to assessvarious factors which operates within their environment and thus impacts their decision-making. There are generally two most important framework that addresses micro environment. SWOT analysis and VRIO framework. The main aim of these two framework is to analyze the organization's weakness, strength as well as internal capabilities to know their position in market. This framework basically helps to analyze that whether the various resources being used offer any value to firm or not. The major strength of Sainsbury is their great brand name which has enabled the company to enter the various markets. On the other hand, major weakness of company is their low margin. The company has lowered their prices for attracting customers which has eventually reduced their revenue ratio(Schaltegger, Hansen and Lüdeke-Freund, 2016). Porter five forces Porter five forces is basically the framework which helps the organizations to identify as well as assess the major competitive forces which will shape the overall industry as well as help them to determine the weakness of industry along with strength(Ardley and McIntosh, 2019). Threat of the new entrants The threat of new entrant is basically low for Sainsbury. The major reason behind this is that for entering this industry in which Sainsbury operates, there is generally high requirement for capital and thus this it becomes difficult for the new entrants especially small business to spend such high amount for entering this industry. Thus, in this view, threat of the new entrant is generally low for Sainsbury (Pramanik, Maiti and Maiti, 2018). Bargaining power of the suppliers The bargaining power of the suppliers are generally low. The number of the suppliers in this industry are generally high in comparison to the customers number which means that suppliers do not have much control over the different prices. Thus, this makes their bargaining powerlow. Besides this, as suppliers are high in number for Sainsbury, they can easily switch other suppliers when they demand for high. This also makes their bargaining power low (Amoako and Dartey-Baah, 2020). Bargaining power of the buyers
In comparison to the number of suppliers, the number of buyer within retail industry are generally low and there are generally very few firms among which they can choose for purchasing their products and services. This makes the bargaining power of these buyers a much weaker force. Besides this, in terms of the product differentiation, Sainsbury is widely known for having highly differentiated products and this means that for purchasing innovative products which can satify their needs as well as demands, customers will not switch to other organization. Thus, this also makes the buyer's bargaining power much weak (Lozano, 2018). Threat of the substitute products Due tothe high presence of other retail companies like Asda, TESCO, Sainsbury generally faces the high threat.As these companies mainly offers somewhat similar products thus this becomesa challenge for Sainsbury becausethese organizations might provide substitute products similar to products as well as services of Sainsbury. But on the other hand,products of Sainsbury are highly differentiated thus this also makes difficult for its competitors to imitate their products or offer substituteproducts. Hence, threat of the substitute products is generally moderate for Sainsbury(Trevisan, 2016). Rivalry among firms There are generally various competitors for Sainsbury like TESCO, Asda which have a string presence in the market and thus this makes the rivalry among these firms fierce as well as severe. The competitors of Sainsbury generally have high share in the market which makes a high level of competition within market for it. This high competition generally leads to high rivalry among these firms and is estimated to continue grow in near future (Morelli, 2018). TESCO Threat of the new entrant The threat of new entrant is generally high for TESCO. The major reason for this strong force is that it is generally easy for new entrant to access the distribution network and thus can easily set their distribution channel at low cost. This basically makes a high threat for TESCO (Nayak, Bhattacharyya and Krishnamoorthy, 2019). Bargaining potential of the suppliers Coming on the distribution network as well as suppliers of TESCO, company generally do not have wide range of suppliers and their distribution network are not much widespread in comparison to Sainsbury.Due to low number of suppliers, these generally have a great control
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over the prices. This high dominance on cost and price makes the bargaining potential of the suppliers much strong (Sanaei and Sobhani, 2018). Bargaining potential of customers Talking of the customers, TESCO generally have a high number of customers in comparison to the suppliers. Although, it has large number of customers across countries but coming to the differentiation level, its products as well as services are not much differentiated and innovative than other competitors like Sainsbury, Asda. Due to moderate differentiation, there are chances that customers might switch to other competitorsthus this makes the bargaining potential for TESCO a moderate factor (Braun, Latham and Cannatelli, 2019). Threat of the substitute products Due to moderate differentiation in the products as well as services,threat of the substitute product is generally high for TESCO. As their competitors captures a great market share due to high level of innovation and differentiation in their products thus in this scenario, its moderate differentiation and less product lines makes this threat high (Raghunath and Rose, 2016). Rivalry among firms The strong presence of various competitors like Asda, Aldi, Sainsbury makes the rivalry among various organization much intense as well as ferocious. Due to the great brand name as well as awareness, the competition among these firms have eventually increased and this might cause great problem for TESCO (Lehmann, 2016). It has been summarized that in terms of the current competitive environment Sainsbury hasestablisheditsgreatpositionalongwithgainingcompetitiveadvantageandthusis performing much better than TESCO. The prominent aspect due to which Sainsbury has dominated TESCOis their high differentiation in products as well as wide distribution network. Due to high disparity among product and high degree of innovation in services, large number of suppliers as well as customers are much reluctant in switching to the other firms. This also makes the threat for substitute products low for Sainsbury due to high differentiation. Despite the high performance, rivalry remains a threat for company and thus is expected to grow (Goode and Negoro, 2018). M3
In order to determine the market position as well as for gaining competitive edge, organizations make use of the most common tool as well as framework which is porter five force analysis. This framework helps the organizations to analyze the various competitive forces which impacts the operations of organization and thus helps to tackle the various threats through designing strategies (Ghobadian and Hopkins, 2017). The most effective strategy which can be used by organization for improving its position in market as well as gaining competitive advantage is enhancing quality. Organization can increase the quality of their products as well as services in terms of differentiation. Besides this, another strategy which will help organization to improve the competitive advantage is enhancing the level of differentiation. By providing the differentiated products, customers will not switch to the competitors and thus this will increase their overall performance in market. Strategic management plan Strategic management plan is predominately the document which highlights the main goals as well as objectives of organizations along with their long-term vision and mission and thus helps to optimize their operations. Vision:Vision statement shows something which an organization wants to achieve. Vision of Sainsbury's is to become the most trusted retailer among all its player where people love to work as well as shop. Mission:Mission of Sainsbury's is to become consumers' first preference for food and all those products which it offers to them by providing at affordable prices and outstanding quality. Objectives ï‚·To provide high quality services to customers. ï‚·To increase customers expectations for healthy and safe food for making their lives easier. ï‚·To increase the market share by 20% in forthcoming year 2020. ï‚·To increase the revenue and profitability ratio by 30% in upcoming year 2020 ï‚·To increase the level of quality by 45% in 2 months Marketing Mix
Marketingmixreferssetof actionswhichsupportanorganizationinidentifying suitability of its products and services as compare to its rivals. Some elements of marketing mix of Sainsbury's are: Product:Sainsbury's offers variety of products and it is stated that it has approximate 15,000 own brand products. It offers beauty products, frozen food, drinks, fresh meat, bakery products, baby and cleaning products. Price:Sainsbury's offers products at fair prices. It is stated that Sainsbury's use premium pricing policy for most of its products. Other basic products are cheaper here at compare to other competitors (Marketing Mix of Sainsbury's, 2017). Place:It offers both online and offline shopping opportunities. Customer cam shop products via online or by visiting one of its store. Promotion:It is stated that Sainsbury's makes effective use of variety of media for promoting its products and making people aware about its services. It uses both traditional and digital marketing channels such as newspaper, social media platforms etc. People:It has well-trained experts and skilled workforce who give first preference to its customersandsupportcompanyinaccomplishingitsgoals.Ithasapproximate186,900 employees. Process:Click and collect service is a process by which customers can complete online shopping easily. Physical evidence:It has attractive store designs as well as layout which helps in satisfying different needs of customers. Quality of baskets, trolleys, packaging are some examples of physical evidence. Ansoff matrix Ansoff matrix is basically the framework as well as too which helps the organization to analyse their current position within market and then devise various strategies for growth. Market penetration Market penetration is basically the strategy in which organization uses their existing products as well as services and advertises in existing market. The organization generally capture market share by advertising already established products in existing market. Product development
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In this, organization captures the market share by developing new products and advertising within existing market. In short, organizations mainly develops the new products as well as services and promote them in existing market. Market development In this strategy, firms mainly enters new market along with their existing and already established products. Basically in this, strategy of the Ansoff matrix organizations take their already established products as well as services into new market and hence capture market share. Diversification This is the another strategy in which organizations mainly enters the new market along with new product. In short, in this strategy organization develops a new product and hence enters new market. This is considered as riskiest option. Sainsbury can seek the support of Market development strategy for attaining competitive advantage. As in this strategy, the organization mainly enters new market with the existing product thus Sainsbury can use this strategy for growth and enter the new market with their renowned products. The main advantage of this strategy is that it has low amount of risk as the products of company are already known by customers thus it becomes easier for organization to enter new market where people are already aware about their products. Strategies Increasing quality of products as well as services This is one of the major as well as effective strategy which Sainsbury can use for sustaining its business performance. Sainsbury can increase the quality of its products by effectively identifying the needs and demands of customers. Besides this, Sainsbury can increase the quality of its services by providing efficient customer support and resolving their complaints as soon as possible (Amoako and Dartey-Baah, 2020). Product differentiation This is the another most important as well as significant strategy which Sainsbury can implement in order to gain the competitive advantage and to establish position in market. Product differentiation is basically the way through which Sainsbury can stand out of the crowd and have a distinct image in minds of customers. For example- Sainsbury can bring innovation in its products as well as services which will help them to gain an edge over their competitors
(Ardley and McIntosh, 2019). Through having product differentiation, organization will be able to enter the new markets and entice new customers. Effective training to the employees Employees forms the integral part of each and every organization and thus serve as the link between customers, organization and market. Sainsbury can provide effective training to their employees in order to incorporate necessary skills within them and for improving the customer service. This will help the organization to gain competitive advantage and enlarge the customer base (Braun, Latham and Cannatelli, 2019). Effective promotional strategy promotion plays an important role within an organizational success as its is one of the highly imperative way through which organizations take their branding message to the wider audience. Sainsbury can use this strategy for gaining an edge over their competitors. Company can increase its communication with the customers by adopting different promotional strategies for different product. This will help them to increase customer loyalty and engagement (Lozano, 2018). Cost leadership This is the another strategy which Sainsbury can implement in order to increase its performance and productivity. Company can utilize the economies of scale and can produce its products at low cost in comparison to their competitors. This will eventually help Sainsbury to reap the profits and attract the customers from wider geographies (Brewster, 2017). Evaluation and control Evaluation and control is the process through which organizations analyses the effectiveness of their products as well as services. Key performance indicators Sainsbury can make use of various performance indicators like sales per ratio, website visit. These tools will help the company to evaluate how much their products are effective and what is the position of company in market. Benchmarking
This is the another control measure which is being used by organization for measuring performance of their products as well as services. Sainsbury can utilize various benchmarking dimensions like quality, time, cost which will help them to evaluate the various aspects of their products. M4 The strategic management plan basically assists the organizations with various strategies as well as steps which organizations can take for overcoming the numerous threats. For combating the various internal as well as external threats, organizations develops some strategies which helpsthemtotakeeffectivedecisions(Brewster,2017).Thestrategicmanagementplan primarily consist of mission, vision, objectives, product mix etc which helps the organization to take effective decisions. Besides this, through the help of Ansoff matrix organization is able to choose the best strategy that will help them to achieve competitive advantage. D1 The macro as well as micro environment helps the organization to analyze the various factors which eventually impacts their operations to high extent. Thus, it becomes essential to develop various strategies in order to mitigate the impact of these factors and increase share in market.
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CONCLUSION It has been summarized that macro as well as micro environment plays an important role within business environment and thus affects the overall decision-making.Where on one hand, macro environment helps the organizations to analyze external factors which impacts their performance, micro environment helps to evaluate internal factors which exists within business environmentandaffectsdecision-making.Inordertogainthecompetitiveadvantage, organizations mainly make use of porter five force analysis which helps them to know the numerouscompetitiveforcesaswellascompetitiveintensitywhichmakestheindustry attractive. At the end, for overcoming the various threats, organizations utilizes strategic management plan which helps them to devise various strategies for establishing position in market and for overcoming threats.
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