Business Strategy: Internal and External Analysis, Competitive Environment Analysis, and Strategic Options for Sainsbury

This report evaluates the macro and micro environment of Sainsbury, including SWOT and PESTLE analysis, competitive environment analysis using Porter’s Five Forces model, and identification of the organization’s existing and/or potential competitive advantage. Valid strategies and tactical objectives to achieve overall strategic objectives are also discussed.

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Unit Number and Title Unit 32 – Business Strategy
Title Strategic Management Plan
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Table of Content
Introduction 03
Part A: An internal and external analysis that provides a platform for
strategic decision making: 03
1. PESTLE and SWOT of the organisation and an evaluation of the organisation’s resources
and capabilities 03
2. Competitive environment analysis using Porter’s Five Forces model 06
3. Identification and justification of the organisation’s existing and/or potential competitive
advantage
4. Valid strategies and tactical objectives to achieve overall strategic objectives p
Part B: On the basis of this analysis critically evaluate and justify strategic
options for the organisation: p-p
1. Critical evaluation of the different types of strategic directions available to the organisation p
2. Justification and recommendation of the most appropriate growth platform/s and strategies
p
3. Evaluate ways and means by which the chosen strategy/ies can be monitored in order to
ensure success p
5.0 Conclusions p
References p
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Introduction
Business strategy is the combination of plans that directs the organization towards a route that
leads to the success. Business formulate plans to overcome a situation or top a achieve a specific
goal. Mission and vision of the organization plays a vital role in strategic plan process as they are
the centre point around which the process revolves.
Sainsbury is a business organization that deals in the retail sector by its long supermarket chain
that is present in different parts of UK. Headquarters of the organization is based in London
England.
Following report will be evaluating the macro and micro environment of Sainsbury. Swot and
pestle analysis tool will be used to do so. Competitive environment of the organization will be
thoroughly evaluated through various models and the competitive advantage of the firm will be
highlighted. Moreover, the strategic options and direction available to Sainsbury will be
described. Justification and recommendation for the same will be mentioned as well.
Part A: An internal and external analysis that provides a platform for
strategic decision making:
1. PESTLE and SWOT of the organisation and an evaluation of the organisation’s resources
and capabilities
PESTLE analysis is considered as a tool which helps to analysis the macro environment as well
as the external situation which will critically affect the Sainsbury's performance.
Political factor- this factor may simply help to determine such stages which influence
the government with the specific economy conditions as well (Awan and et.al., 2022). It may
negatively affect the Sainsbury's, because it is operating the marketing functions within many
countries which it may face the price fluctuation. With the government strategies which may
affect the total business.
Economic factor- the factor helps to determine the overall economic performance which
have direct impact on the Sainsbury's, which create a reason for the long term business as well. It
may basically have a positive impact on Sainsbury's because as the wages rate are increasing
eventually then the GBP may also rise which create a benefit for the company.
Social factor- the factor may shows the social environment of UK, which facing a
change in trends on a regular basis. It may create the positive impact on the Sainsbury's, because
changing trends may attract more customers towards the business. Nowadays, people always
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prefer to be gone with the new trends, such as the fastest delivery option availability, more
flexible with the exchange policy.
Technological factor- this factor shows the innovations which basically affects such
organizational operations of the Sainsbury's. Some time ago organization has faced a crisis
related to the technology which decreased their customer base (Felipe and et.al., 2020). Now it
has many innovative ideas which will help company for expanding the business which increases
the customer satisfaction level and creating a positive impact on the company.
Legal factor- it is having a simple involvement with the internal and external factor as
well which shows the changing in the specific law may have a negative impact on the
Sainsbury's. Changing with the laws which may be the employee laws or the organizational law,
so organization needs to make an extra effort which may help them to reduce the risks.
Environmental factor- this may helps to determine the current environment which plays
a critical role in many industries as well. This may have a negative impact on the Sainsbury's,
because change in laws which are related to the environment and the company needs to follow
that laws will affect the business as well.
The internal factor which are helps to determine the positive as well as the negative impact and
helps to analyse with the SWOT.
Strengths
 Unique strategies with its promotions- this strategy adopted by the Sainsbury's which
help them to stayed up against its competitor.
 Better customer feedback- the organization are holding up the customers to its area
with the higher quality products.
Weakneses
 Switching brand- retail brands faces this issue because changing and switching with the
brands may create a difficulty to retain the customer base.
 Expensive for few customers- this will not make its price like the other companies so
customers found difficulty to have a expensive price rates.
Opportunities
 The Latest trends- Sainsbury's is adopting the latest trends in the wide range of network
over the UK.
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 Growth in rural areas- many villagers are not willingly to use the expensive brands
thus, the company makes it an opportunity to expansion its business to the village.
Threats
 Pandemic- due to the Covid 19 pandemic the revenue has decreased and after this, many
people decline the purchase.
 Competitors- many companies are giving high competition to the Sainsbury's which
could be the threat for them (Hong and et.al., 2019).
Ansoff's growth vector matrix
Market penetration strategies of Sainsbury's- with the use of this strategy Sainsbury's
may easily sell its products which are existing or new in the market, which help organization to
expand its business into the new market. This strategy will simply help to increase the market
share with having a proper use of such products by their existing customer base as well.
Market development strategy- Sainsbury's has already adopted many marketing
strategies which helps them to selling out their existing products in the new country and its new
market place. From the United Kingdom the company has tried to expand its business into many
other countries which face them a failure in it.
Product development strategy- Sainsbury's has clearly developed its marketing with the
well product strategies which are help to sell them into the existing market as well. Organization
has own brand names with the different market segments which shows the company needs to
have an own brand which will basically increase the negotiation level with their suppliers as
well.
Diversification of the strategies- it shows a difficult to implement into the market for
selling out the new products as well as to the new customers which basically not an easy thing.
But Sainsbury's has expanded its business to the new country and diversified it as well.
Mickinsey 7s Model in Sainsbury's which helps to illustrate and created the link
between the 7s of the company which increase the effectiveness of the business. It has states the
3 hard elements as well as the 4 soft elements which are detailed below.
Strategy- Sainsbury's are here to promoting its cost leadership for the strategy for
pursuing in such market environment. In the current time Sainsbury's has facing many issues and
such challenges which includes gaining the customer's trust such financial crisis and the issues
related to the payments for the suppliers.
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Structure- Sainsbury's has grabbed their business into the various layers to the
management from the store and the director's assistant. So the director are very flexible with
dividing the roles for the tasks which helps to gaining a proper business structure.
System- this supermarket chain is clearly captured into the varied range on day to day
basis for having a proper management which are having into the certain variety. It will choose to
get a proper tracking on the management in a regular basic which are known as a proper
management.
Shared value- it includes the values which includes the core value and helps to corporate
the proper culture with the specific values. Sainsbury's always ensure about such activities and
the operations which creating in effective manner which encourages the innovations and
creativity into the organization.
Style- Sainsbury's includes many factors which are follows into the management
leadership and in a effective management leadership which shows the competition between the
team and group as well.
Staff- Sainsbury's has a proper qualifies employee which is more sufficient to the
company (Yang, Geng and Feng, 2020). Employees of the organization has a different roles and
responsibilities and it always hires the best candidate for the company as well.
Skills- it is mainly describes into the capabilities and abilities of the employee which are
having a major focus on the business partition. Which includes such as an employee skills vs the
skill management, employees skill and organization's competitive advantage. Organization has a
better workforce with the better environment with the best skills and qualified employees.
2. Competitive environment analysis using Porter’s Five Forces model
Threat of new entrants
Retail industry in which Sainsbury operates poses a higher threat of new entrant because of
high demand of the necessity goods. New entrant in the sector brings innovation that increases the
competitiveness in the industry. Innovative ideas of entrepreneur these days is a major threat to the
firm as it can divert the customer base of the organization by applying unique methods of customer
serving. Many of these firms effects the pricing in the industry by introducing lower prices and
discounts to the customer.
Threat of existing competition
There is a stiff competition in the retail sector which is higher threat for Sainsbury as it
effects their business commencement. Various business activities of the competitors affect the
organization and enforces them to formulate plans to tackle the competitive barrier. The customer
base of the organization I effected by these competitive forces which needs to be regained by
implementation of various strategies (Hamilton, 2020). Some of the competitors of Sainsbury
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operates on a global level which makes them a step ahead in the industry. Tesco, Asda and Aldi are
some of the rival firm which impacts the business in different ways.
Threat of substitute goods
Threat of substitute goods on the organization varies time to time because of various factors
that affects the viability of the products and services offered by the firm. Fluctuation in price is one
of the main reason behind the fluctuation which depicts the consumer shift towards another
commodity. Value proposition of the products is compared with other options available to them
which directs them whether to go for substitute or not.
Bargaining power of customers
Customers of the organization enjoy high bargaining power because of the higher
competition in the industry. Competition in the industry derives this power of customers by
implementing various strategies in its pricing that attracts the customer. Higher availability of brands
providing same goods and services makes it easier for customers to shift towards another brand. Low
switching cost is one of the another factor that gives customer a higher bargaining power as the cost
forbearance is minimum on them (Carraher, 2018). Higher bargaining power to them also depicts
disloyalty of the customers in the industry which is a major issues as it effects customer retention rate
of the firm.
Bargaining power of supplier
Number of suppliers is higher in the industry which can provide needed raw material to
the organization. So, it can be noticed that suppliers experience very low bargaining power
because of this availability. Salisbury can avail raw material from other if one supplier hikes the
price. This factor makes it harder for the supplier to charge according to their wants. These goods
are standardized without a noticeable difference in prices that is purchased by the organization
and gives them higher power to avail it in low prices.
3. Identification and justification of the organisation’s existing and/or potential competitive
advantage
Sainsbury Plc is one of the giants in the retail sector whose image and reputation is the
biggest strength that gives them a competitive advantage over its rivals. Since its establishment the
organization has tried well to maintain there goodwill through various fair practices in their business.
This has helped the organization to continuously improve their image and reputation in the market
that has been a great point for maintenance of regular sales. This factor attracts the customer by its
trustworthy image (Myšková and Kuběnka, 2019). The enhanced goodwill gives a great
competitive advantage to the organization that helps in gaining good position in the industry.
Pricing factor plays a vital role in the competitive environment which helps a firm to attract a
whole group of customers towards them. The brand caters its customers with qualitative good and
services at lowest prices in the market which becomes a great selling point. Continues efforts for
establishing an efficient supply chain is made by the management that results in providing the low
cost goods to the customer. This low pricing along with some offers and discounts increases the
business of Sainsbury.
Many aspects of the Sainsbury reflects the honesty through their product and services offered
to their customers. The organization has successfully implemented fair-trade practices in every
department which enhanced their image in the perspective of the customers. A trust that has been
build through these practices have helped to gain higher profits than many of its competitors. The
competitors of the company has found it difficult to address this beneficial factor. These all factor
have combine acted as a major advantage of the organization over the rivalry firms by enhancing its
goodwill and reputation that is directing the organization towards higher sustainability.
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4. Valid strategies and tactical objectives to achieve overall strategic objectives
Sainsbury can avail various strategies for its further growth and enhancement in the business
to achieve its long and short term objectives. Some of the valid strategies that can be implemented
for higher development and enlistment of the firm are described below:
Cost leadership strategy
Focus of this strategy is on providing goods and services at the lowest prices possible and
become market leaders to cover wider customer base. Following this strategy the organization can
become leader in the industry which have the capability to divert some of the factors according to
their benefit. Although, this strategy is somehow implemented in the business to an extent which can
be further enhanced to become achiever higher levels of success (Kreps, 2019). Competitive
advantage can be gained through this strategy as this can highly influence the customers choice of
brand. While following this strategy the organization can work on its supply chain and production
process which can reduce the manufacturing cost and as a result the prices will be effected.
Differentiation strategy
This strategy focuses on modification of the product and services to make it look different in
the segment which can get the attention of the buyers. This strategy can be followed by Sainsbury by
investing in research and development (R&D) of commodities offered by them to maintain its
uniqueness. However, the firm has to maintain the prices and the relativity of the product with
customer preferences for getting success through this strategy. This strategy can help the firm to
create a unique image in the customer's mindset through frequent innovations (Hole and et.al.,
2019). It can increase the customer base by attracting new ones and retaining the old buyers.
Cost focus strategy
This strategy is an extension of cost leadership strategy that focus on the niche market
segment and not on the wide diversification. The organization can implement this strategy by
evaluating the most profitable segment and analyzing there preference or demands. The company can
then focus specifically on that particular segment to achieve higher profits by introducing aggressive
cost in the industry. This can increase the profit margins for the firms as a result of increased gross
revenue. Following this strategy the company can eventually get specialized in the field and become
market leaders through the continues focus on the specified segment. There are various methods to
do so such as partnering with rival firms in the existing market segment.
Differentiation focus strategy
Differentiation focus strategy directs the business towards focusing on a niche market
segment to develop product and services accordingly. Determination of a most profitable market
segment where the organization can achieve success is the initial step of this strategy (Bruijl and
Gerard, 2018). The next step direct the organization to develop the products and services according
to the needs of the determined market segment of specified customers. Following this strategy the
organization can enter the areas where the competitive is much lower and can cover wider customer
base of similar preference.
Part B: On the basis of this analysis critically evaluate and justify strategic
options for the organisation:
1. Critical evaluation of the different types of strategic directions available to the organisation
Strategic direction refers to the journey of the plans implemented that is highly influenced by the
business objectives. There is always an predetermined objective that is set for evaluating the possible
ways of its achievement. These objectives are sometimes based on the growth of the firm and
sometimes to tackle a barrier (Rijanto, 2021). However, these objectives gives a perspective to the
strategical process in which it needs to conclude the final plans. Alternatives are evaluated on the
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basis of these organizational objectives in terms of its capability and viability to achieve them.
Mission and vision of the organization is also depicted in this process. The objectives are ultimately
set to achieve these long term mission of the business. Mission of the firm is preset in the mind of
management which doesn't need to be determined before formulating every strategy which means
that it is not determined on frequent basis. These are the key drivers of the strategical process that
leads the way towards achieving higher success that can uplift the level of the organization.
2. Justification and recommendation of the most appropriate growth platform/s and strategies
For increasing the level of the organization it has been recommended that the firm should try
expanding its business on the global level. Global markets are providing abundance growth
opportunities to the business. Sainsbury can grab this opportunity which can increase its customer
base as there is an wide availability of demands produced on the international level. Goodwill
established by the firm in the domestic market can help in gaining good hold in the international
markets as well (Benzaghta and et.al., 2021). Global expansion can help the firm to gain an
increased competitive advantage over its rivals. There are many competitors of the Sainsbury that
operates on a global level which acts as a drawback for the firm. This expansion can help in
elimination of this barrier to a certain extent. There are various developing countries that are still
untapped as no organization has majorly focused on them, this is one of the biggest opportunities for
Sainsbury's as there is no competition and the firm can establish a strong foot in those markets.
3. Evaluate ways and means by which the chosen strategy/ies can be monitored in order to
ensure success
After the implementation of various strategies it is needed to be continuously monitored in order to
determine the factors that are hindrance to it (Teoli and et.al., 2019). There are various ways in
which the strategies can be monitored such as analytical method, interviewing stakeholders etc. one
of the most feasible ways to monitor the strategical direction is the use of kpi's. These are the key
performance indicators which are used to keep a track of progress or failure. Key performance
indicators differs from each other depending upon the subjects that needed to be monitored. To
monitor the strategical direction, some of the kpi's are mentioned below:
 Customer satisfaction- strategies of Sainsbury are based on the objective of providing better
quality of goods and services to its customer in reasonable prices to satisfy their needs. This
satisfaction can be used to determine the performance of the strategies. Feedback forms can
be provided to the customer in the outlets of the organization.
 Profits- aim of every business commencement is to attain higher levels of profits. The
figures depicting the profits of the organization after implementation of strategies is another
kpi's that helps in performance monitoring.
5.0 Conclusions
FROM the above report the strategical process has been thoroughly concluded by highlight
every aspect in context of Sainsbury. Swot and pestle analysis tools have shown the macro and micro
environmental factors that impacts the operations of the company. Porters five forces model applied
on the firm has evaluated the competitive environment of the industry in which the organization
operates that is retail sector. Competitive advantage of the organization over its rivals that help in
achieving profits has been described in the report. Porters generic strategy has been used to suggest
various strategies that can help the firm to uplift its level in the market. Strategic direction available
to the organization is mentioned with the key drivers that is objectives and mission of the firm. Most
beneficial growth platforms for the firm has been mentioned along with the methods that can help in
monitoring the performance.
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References
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