Strategic Management Analysis for Sainsbury's

The assignment requires students to analyze the ethical implications of a PR campaign by Sainsbury's during WWI, considering various business and marketing theories. Students are expected to explore how the campaign was perceived by students, using case studies and academic research to support their arguments.

Business Strategy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Application of PESTLE framework for analysing Macro environment ...............................1
TASK 2............................................................................................................................................4
P2 Analysation of internal environment.....................................................................................4
TASK 3............................................................................................................................................6
P3 Analysation of competitive forces.........................................................................................6
TASK 4............................................................................................................................................9
P4 Suggestion of strategic direction to Sainsburrys'...................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
In the words of Miller and Dess (1996), business strategy is the combination of various
plans which is made by management for reaching their targets. Company use business strategy in
order to move forward towards organisational mission and vision. While formulating different
strategies it is assured that same are capable of fulfilling the set goals with the available
resources.
Sainsbury is a public limited company which was founded in London. This enterprise is
operating in retail industry and they are second largest firm in terms of market share.
This assignment will discuss about effect of external factors on chosen company for which
pestle analysis will be done. This will help in identifying the various elements that are present
outside business surroundings and has indirect impact on Sainsbury operations. Stakeholders'
analysis will also become part of this file. For evaluating internal environment of firm, SWOT
analysis and VRIO framework will be used in the project. Porters five forces model will be used
for evaluation of competitive forces. Thereafter suggestion will be provided to the selected
enterprise as how it can improve its overall performance using strategic directions. This will
assist Sainsbury in doing more effective business.
TASK 1
P1 Application of PESTLE framework for analysing Macro environment
Business enterprises make working plans so that they can achieve set objectives and
mission (Hammad, 2015). Synchronisation of all the plans is business strategy which helps in
evaluating failure of chosen approach implementation. Making strategies is important for every
company because it provide direction to organisation where they will be moving forward in
upcoming time. External environment impact the performance of company is long run because
factors like change in technology, is not in the hand of company. Below is PESTLE analysis of
Sainsbury:
Political – Political relationship between different countries make a huge impact on
growth of an organisation. Sainsbury is an organisation which is own by Qatar investment. They
have around 21.99% shares in this firm. Diplomatic ties between two countries are getting strong
continuously and this factor is affecting company in positive way. Sainsbury is increasing their
business in UK because regulations are not hindering their growth. Brexit had long lasting as
1

well as significant effect on business operations, as than Management of enterprise is not sure
about which policy will prevail in upcoming time. Therefore, they fail to construct long term
plans for growth of business (Sivalingam, 2015). This uncertainty is unfavourable for company
and it is stopping them from become table leader in the sector in which it is dealing in UK. In
order to protect the health of user’s government has made different laws that are associated with
the packaging and food which is offered at the retail stores. This restricts the areas of business in
which Sainsbury can grow.
Economic – Buying capacity of customers depend upon their disposable income. Cost of
living in UK is increasing with a higher rate compared to disposable income and retail sector is
facing heat of this challenge (Craven, 2015). Low purchasing power of customers is making a
negative effect on Sainsbury performance as well as demand in market has reduced due to
unfavourable economic condition in the country. Changes in economic conditions also have
great as well as significant impact on the supply of goods as well as services. Purchasing power
of customers depends much on the disposable income they are left with and therefore this way
economic factor has great influence on the growth of Sainsbury.
Social – Trends are continuously changing in business environment. In UK, people are
getting health conscious and this trend is affecting growth of their organic food business in a
positive way. There is also a negative effect of this factor as due to great competition in this
industry it is difficult to manage the same level of profit margins every year. As every new store
come with better options for customers the ranking of Sainsbury drops down.
Technology – Every business enterprise understand that they cannot ignore new
development in technology. Sainbury is using latest technology in their business and use of data
driven analytics is helping company in understanding needs of customers in a better way. Use of
innovation is business played crucial role in decreasing cost of operations and the organisation is
availing the benefits of new technology in terms of targeting more customers (Peng, 2017). Apart
from this with the assistance of advance application like digitalisation has made the billing and
security system more effective. Now customers waiting time is reduced and better quality of
services is ensured during the visit of customers.
Legal – Brexit can be beneficial for business firms in upcoming time but in present
scenario, it is not supporting firms in growing their business. This political incident is considered
as the main reason behind delaying of various regulations which are important for whole retail
2

sector. Sainsbury cannot make future plans because they are not sure about what rules will
survive in upcoming time. This uncertainty is hampering strategic plans and it is reducing
company from growing in desired way. Apart from this, legal factors also provide the guidelines
to the management as how employees have to be treated. Different laws are formulated such as
employment law which helps in maintaining security and equality at work place. Minimum wage
act, living wage, hours equality is some of the distinct laws which has to be followed by
management of Sainsbury in order to avoid any external intervention by government.
Environment – Sainsbury in working for reducing operational waste. Their recycling
system and food donation initiatives is helping company in fulfilling their corporate social
responsibility and it is also increasing goodwill of firm. Promotional of the positive image is
another factor which contribute in increment of revenue for which the referred to enterprise is
also taking an initiative of changing the packaging system. More emphasis is given on promoting
eco-friendly packaging material which further add value to brand. (Higgins, Omer and Phillips,
2015).
Stakeholder analysis of Sainsbury
Stakeholders are the different parties who has direct or indirect interest in a particular
business. It is important to consider them while taking any important decision regarding the
organisation. Imperative stakeholders of Sainsbury are customers, employees, shareholders,
investors and their detail analysis is done in the following report:
High power, low interest – Sainsbury is owned by Qatar investments and many board
members, who are from this company, does not take much interest in decisions taken by
management. Qatar investment firm, are interested in price, product, range, services etc. they
have power to make big calls so senior managers of Sainsbury should adopt the strategy of ''keep
them satisfied''. This work can be done by engaging them in their area of interest. This will allow
them to increase stakeholders concern toward firm and it will reduce the conflicts which may
arise between managers and board members because of miscommunication. It is required by
company to focus on satisfying the need of their stakeholders.
Low power, high interest – Sainsbury have few suppliers whose business is completely
dependent on this this firm. They do not have power to make changes in the policies and strategy
of Sainsbury but ignoring their existence is also not right. Management need to keep them
informed about company's work and future plans so they can get few valuable suggestions from
3

them and obtain ground knowledge. They work as goodwill ambassador for firm and involving
them in low risk decisions is not a bad idea (Burlton, 2015).
Low power, low interest – An individual customer cannot influence company's
performance but he/she is interested in the strategies and plans of company. Sainsbury strategy
for dealing with them is to monitor their buying pattern and understand their thinking. Company
does not communicate with them in order to avoid the chances of boring them. They send them
newsletters and mails so these stakeholders do not feel completely disconnected with firm. It is
done as though they do not hold power but in the end the products are offered in the market for
which it is essential to keep the customers informed. This way they get to know about the range
of products offered by Sainsbury which assist them in taking their buying decision.
High power, high interest – Head of various departments are chief executive officer are
few powerful people in Sainsbury. They show high interest in operations of company because
their earnings and career growth is connected to it. Organisation has adopted the strategy of
''manage closely'' for dealing with powerful stakeholders who are highly interested in company's
business. Key people should be involved in decision making system and regular consultation
with them is also important. Apart from this employee and customers also hold major interest in
Sainsbury as they are the one who gets directly affected by any change in the business.
TASK 2
P2 Analysation of internal environment
Strategic capability refers to a business' ability to successfully employ competitive
strategies that allow it to survive and increase its value over time. Multinational corporations
operate in business environment which can be divided into two parts i.e. internal and external
(Teh and Corbitt, 2015). Internal environment consists of various elements like workers,
management etc. There are few internal factors who have capacity to affect whole organisation
while others are limited to managerial level. Money and quality workforce are two key resources
of this organisation. Below is VRIO analysis for analysing evaluating strategic capabilities:
Value – Qatar investment is an organisation who is financially sound and they can pour
any amount in Sainsbury which is demanded by management of the company. Money is a
valuable resource and there is no doubt that it is ''expensive''. Obtaining finance in a market is not
easy task and it comes at a very high cost (Pearson, 2016). This company has few competitors
4

who are failing to expand their business because of lack of financial resources. Sainsbury does
not take tension of money because their owner has deep pockets. Qualified personnel are another
resource which provide competitive advantage to company. This firm may have issues relating to
high employees turnover but because of huge manpower, it is not affecting their business in a
significant way. Financial and human resources, both are valuable to firm. They cannot think
about outsource process like recruitment because it may reduce value of their personnel asset.
Rareness – The amount of money which Sainsbury have in their organisation is not very
rare. There is various enterprise in retail sector of UK whole are financially rich as of this
company. But these firms do not have quality workforce which Sainsbury have and they avail its
advantages by making effective and successful strategies. Qualified and experienced workers are
rare because they are limited. Company directly ask the non-deserving employees to quit their
job which further saves the operational cost and promote the talented workers to grow further
(Linder and Williander, 2017).
Imitability – Money is valuable but it is not a unique asset. Imitating financial strategy of
Sainsbury is possible but it is not too easy. This company invested almost 150 million pounds in
improving pricing position by reducing price of many commodities. Other companies can do that
but they may not get desired result because customer will already get attracted to the offers
which is given by Sainsbury. Imitation of talent is not possible. Human resource is not only
valuable and rare; it is also impossible to imitate.
Organisation – An organisation can have many valuable, rare and difficult to imitate
resource but if they are not using it properly than it is of no use to company and it cannot provide
any extra edge to firm. Earlier Sainsbury was not using their monetary resource in an effective
way but now they have taken many decisions for assuring that financial assets are exploited in
best way possible. This resource can be not rare and imitable but it was used in a fine way at
Sainsbury. Organisation understand its value and it is the prime reason that are not working in
assuring its optimum utilisation. Human capital is another significant resource of company and it
is also exploited in an exceptional manner. This business corporation is among top retailers of
UK because of appreciable use of talent which is present in workers (Hakansson, 2015).
SWOT analysis of Sainsbury
Strengths
5

Sound domestic presence – Sainsburys has more than 600 supermarkets and
approximately 400 convenience stores. They online presence is getting strong in every years and
some of their stores are delivering products in single day. High number of customers and
remarkable presence in UK market helped company in gaining second spot.
Product offering and advertising – This company offer almost 30000 products and
around 20% of them is owned by own label. They are also spending huge sum in advertising and
it is increasing their brand value in UK market. Aggressive advertising is main reason behind
high footfall in Sainsbury store.
Weaknesses
Low margins – Competition in retail sector is continuously increasing and more number
of player means limited profit on every product to existing stakeholders. Sainbury recently spend
150 million pounds for setting competitive price of their goods. Increased cost burden in
decreasing margin per product and this problem is becoming a big weakness of whole
organisation.
Brand switching – Making permanent customers is important for every retail firm
because these kind of buyers provide stability to the enterprise and help their business in tough
period. Sainsbury is doing lots of promotion and they are also running loyalty program like
reward system is used for the regular customers in which they are provided with coupons or free
gifts. Still this enterprise fails to influence clients as there is tough completion in the retail sector
and there are close substitutes available for costumers which further raise pressure on the
selected organisation to control its overall cost (Jenkins and Williamson, 2015).
Opportunities
Expand business in Asia – Asian countries are growing with a remarkable percentage and
buying power of their citizen is continuously growing with a high rate. Nations like India and
China are going to drive growth of global retail sector in upcoming time and if Sainsbury will
open their stores in these countries then they can easily increase their profits without investing
much money. Due to high political conditions prevailing in these countries the selected
organisation may come across difficulties at the time of taking entry but later once these market
is captured the present profit margins can be raised to a great extent.
6

Diversification – there are multiple stores in UK who are offering similar products in the
market for customers. Sainsbury by following the concept of change can attract more businesses
and can establish a different image in the eyes of customers.
Threats
Increasing number of retailers – Retail industry is already facing intense competition and
entry of new players in this sector is reducing footfall in the stores of present companies like
Sainsbury. This enterprise is trying everything to increase their sales but they are not getting
expected response. Increasing competition will enhance the threat of decreasing profits and may
take out firm from top three player of UK's retail industry.
Impact of Brexit – Every business organisation is concerned about outcome of Brexit.
They are not failing to make long term plans but they are also facing the challenge of low
demand of consumer goods in the market. Uncertainty is a major threat for Sainsbury as the
market conditions keeps on fluctuating and any unfavourable modification made by government
or external competitors can affect the profit margins for the selected organisation to a great
extent.
TASK 3
P3 Analysation of competitive forces
Competition is present in every sector but rivalry in retail industry of UK is touching a
new height. Porter's five force model is used for analysing the situation of company and the
industry where it is operating. Below is application of Porter five force analysis:
Threat of new entry – New players are entering in retail sector because it is not too
difficult to start a retail chain business. There is no doubt that this threat is high for Sainsbury
and all the other firms who are running their business in retail sector. One can analyse that there
is huge investment needed for starting a retail chain which selling products in both major
segments i.e. food and non-food section (Pearson, 2016). New entrants that can be in any form
for instance fresh entry in same sector, development of already existing established unit or a
brand from overseas can influence the current operations of the referred enterprise. Sainsbury
cannot ignore presence of new entries because they may start operating at low level in initial
stage but they have power to steal customers from big brand.
7

Competitive rivalry – Competition in retail market is high. Tesco is on number one spot
in terms of market share and then comes Sainsbury & ASDA who fight for number three spot.
Retail firms are running loyalty programmes and offering heavy discounts on some key products
because they want to attract more number of customers. UK is a developed country and size of
retail market in this nation is large. Organisations like ASDA and Tesco are making every
essential effort for assuring long term profitability and one of the important part of this process is
to reduce number of big players from the market. Sainsbury can survive this fierce competition
by concentrating on sustainable differentiation. It is important for this enterprise to keep close
control over its various operations so that profit margins are maintained and also by raising the
present scale it can compete with the other brands more appropriately. Thereafter, collaborating
with competitors to increase the market size rather than just competing for small market can also
be of great help.
Threat of substitution – Sainsbury is selling consumer goods like food, clothes etc.
Chances of substitution of these essential products is low because they are considered as
necessity. In retail sector, companies do not need a big innovation every month. Their main aim
is to improve buying experience of customers and they are doing this work by continuously
adopting new technology (Hatherly, 2016). Sainsbury also started selling their products online
and introduce self-checkout machines in their stores because they know that this will increase
their sale and customer will get a better experience when they will get ordered items at their
home or they do not have to wait in long queues. All the competitors of Sainsbury such as Tesco
Aldi all selling similar type of products and the only threat of substitution for this firm is that
their competitors can replace by attracting their permanent customers.
8

Source:( Porter’s Five Forces of Competitive Position Analysis, 2018)
Bargaining power of buyers – When buyers have more options i.e. if the number of
sellers is high then it gives more power to customers. There are many big players in retail market
so if buyers are not satisfied with one of them then they can easily switch to other one. The only
way of reducing customers power is to adopt the strategy of product and price differentiation.
Unique goods and competitive pricing can force buyers to buy commodities from Sainsbury.
Bargaining power of suppliers – Vendors have low power because company has many
suppliers. Every vendor understands that if they will crack a deal with Sainsbury then it will
enhance their business. This company has stores across the nation and they give orders in bulk.
Any supplier would get agree on the terms and conditions which is set by Sainsbury because they
are among top three retail firms of UK. Vendors do have power to control price of product but
up-to a limited extent (Aluko and Knight, 2017).
TASK 4
P4 Suggestion of strategic direction to Sainsburrys'
Business enterprises seek right direction for moving forward as it assist them in attaining
their goals. There are few firms who want to achieve many goals in one shot, they ultimately end
9
Illustration 1: Porter’s Five Forces of Competitive Position Analysis.

up at same position because moving in more than one direction in a fix time period is not
possible. Below is use of Porter's generic strategy for suggesting strategic direction for the
company:
Cost leadership – This generic strategy concentrates on earning competitive advantage
by enhancing their profit through lowering down cost of operation. If an organisation will sell
their product at industry average price or even below it, then they can easily increase more
market share and attract large number of customers.
Differentiation – Under differentiation strategy, company sell products in same segment
but they are different in terms of feature, durability, functions etc. Company have to make their
products more attract in order to survive and grow in tuff competition. When two items are
similar then customers start exploring speciality of the commodity (Jones and Comfort, 2018). If,
at this time, buyers find different specification in the product then it increases sales of
organisation and develop an effective image of firm.
Cost focus – Above two strategies focus on broad level i.e. it concentrates on thousands
of customer but this tactic has narrow scope and it targets limited & unique buyers. There are
many firms who sell few products in the market or their most of the revenue come from sale of
particular item. They try to reduce cost of this product in order to earn some extra edge over their
rivals. Cost focus play earning loyalty of buyers and it is used for making customers feel special.
Differentiation focus – This is another important focus strategy where consumers are
attracted by giving them additional features in their product. Concentration on specified niche
market help company becoming number one seller of a particular product. Both focus strategy
has same aim i.e. to provide ''something extra''.
Suggestion
Sainsbury should move in two directions i.e. construct strategy for either of the two areas.
First is attain cost leadership and second is differentiation. If this firm will sell their offering at
low or competitive price, then their number of customer will increase without spending much
amount on promotional events. In present time, cost of company's business is enhancing because
they are spending funds on advertising and promotional offers. If they will develop image of an
organisation who sell good quality of products at affordable rate, then it will allow firm to move
on correct path. One can question that decreasing price of commodities will result in low margin
but the merit of this strategy is that it will increase number of products sold and help company in
10

promoting their brand without spend much fund on advertising (Alexander, 2015). Sainsbury is
already spending thousands of pound on advertising so if they save this money and use it for the
execution of cost strategy then it will not negatively impact profit of company. It is suggested
that in order to reduce the overall cost of firm it should work on controlling its overheads. This
will further increase the profit margins for the shareholders.
Another strategic direction which organisation can chose is to introduce products which
are not available at other retail stores. Differentiation is a strategy which can separate this
company from others. Most of the retail enterprise are selling similar products, if Sainsbury will
add something extra in most of their offering then it will motivate buyers to buy goods from their
stores because they are providing additional features in the products which are available at
company's store. Sainsbury is operating in a highly competitive market. In this type of situation,
adopting differentiation strategy is considered as best option (Adams, 2015). Customer do look
for a new product option in these circumstances as they get bore with the same product they use
every time. The buying decision is much influenced by the variety offered to them by different
stores.
CONCLUSION
From the above report, it can be concluded that external elements can work against or in
favour of company. They are not in control of company so instead of thinking about controlling
them, company should try to adapt according to the present situation. PESTLE analysis is an
effective tool and it cover all the major factors which affect company's operations. VRIO and
SWOT analysis help in understanding an organisation for internal side. VRIO analysis showed
that human resource of Sainsbury supports them in earning competitive advantage. Measures
strengths and weaknesses shows the reality on where company is standing. Every organisation
wants to explore the opportunities which are available to them. They also like to do planning for
future threats and SWOT analysis help them in accomplishing both of these tasks. Sainsbury has
various opportunities but the list if threats is also very long. Porters five force model is used for
company and their industry. Cost leadership and differentiation are two recommendations for the
organisation for supporting firm's strategic direction.
11

REFERENCES
Books and Journals
Adams, S., 2015. Towards an Ethical PR? An Exploration into Student’s Ethical Perceptions
towards the Sainsbury’s WWI Campaign. International Journal of Ethics. 11(3).
Alexander, A., 2015. Decision-making authority in British supermarket chains. Business
History. 57(4). pp.614-637.
Aluko, O. and Knight, H., 2017. From corner store to superstore: a historical analysis of
Sainsbury’s co-evolution. Journal of Management History. 23(4). pp.423-435.
Burlton, R.T., 2015. Delivering business strategy through process management. In Handbook on
Business Process Management 2 (pp. 45-78). Springer, Berlin, Heidelberg.
Craven, N., 2015. Combined profits at Tesco, Sainsbury’s and Morrisons fall by£ 2.5 bn—and is
set to shrink further as shoppers cut back.
Hakansson, H., 2015. Industrial Technological Development (Routledge Revivals): A Network
Approach. Routledge.
Hammad, A., 2015. Strategic Change and Its Management to Expand Business Through
Implementation of Models: A Case Study of Boots UK.
Hatherly, D., 2016. The failure and the future of accounting: Strategy, stakeholders, and
business value. Routledge.
Higgins, D., Omer, T.C. and Phillips, J.D., 2015. The influence of a firm's business strategy on
its tax aggressiveness. Contemporary Accounting Research. 32(2). pp.674-702.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Jones, P. and Comfort, D., 2018. Storytelling and corporate social responsibility reporting: A
case study commentary on UK. food retailers. Journal of Public Affairs, p.e1834.
Linder, M. and Williander, M., 2017. Circular business model innovation: inherent
uncertainties. Business Strategy and the Environment. 26(2). pp.182-196.
Pearson, S., 2016. Building brands directly: creating business value from customer
relationships. Springer.
Peng, M.W., 2017. Cultures, institutions, and strategic choices: Toward an institutional
perspective on business strategy. The Blackwell handbook of cross‐cultural
management. pp.52-66.
Sivalingam, R., 2015. Strategic Management. Industry Analysis, Strategic Drift and Re-
Strategizing.
12

Teh, D. and Corbitt, B., 2015. Building sustainability strategy in business. Journal of Business
Strategy. 36(6). pp.39-46.
Online
PESTLE Analysis with Mind Map Tools.2017. [Online] Available through
<http://www.mindmapsoft.com/pestle-analysis-mindmap/>.
Porter’s Five Forces of Competitive Position Analysis.2018. [Online] Available through
<https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html>.
13