Micro and Macro Environment Analysis of Sainsbury

This report provides an analysis of the micro and macro environment of Sainsbury, including the application of PESTEL and SWOT analysis. It also explores the influence of the micro-environment on the business and its strategies using SWOT analysis. The report further explains Porter's Five Force model and evaluates its success in the chosen business.

Business Strategy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
P1 Explanation to Micro and Macro environment. Application of Marco environment to the
business-......................................................................................................................................1
P2 Application of Micro-environment to the business. Mentioning influence micro-
environment has on business and its strategies with the help of SWOT analysis-.....................4
P3 Explaining Porter's Five Force and then applying this to the chosen business for evaluating
how successful it is-....................................................................................................................6
P4 Strategic planning..................................................................................................................8
CONCLUSION..............................................................................................................................12
REFRENCES.................................................................................................................................13

INTRODUCTION
Business Strategy is the set of competitive action and move which is used by business to
gain huge consumer attraction, competing with rivals successfully, strengthening their
performance and gaining organizational goals.
Sainsbury is the largest supermarket chain in whole UK. It has market share of 16.0% in
the supermarket sector. The total revenue of £28.456 billion. The above report includes the
macro environment and micro-environment analysis which is determined with the help of
PESTEL and SWOT analysis. Report further carried forward with explanation of Porter's Five
Force Model. The report ends with strategies and plan which can be implemented by company
into their business.
P1 Explanation to Micro and Macro environment. Application of Marco environment to the
business-
Micro environment-
Micro environment in the marketing include all those micro factor which affects business
strategy, performance and decision-making. It is very essential for business success for
conducting micro environment analysis (Kanieski da Silva and et.al., 2017). This includes
supplier, customer, competitor, shareholder, employees and media. All marketing strategies, plan
and objectives could be carried out by these component.
Macro environment-
Macro environment is set of the external condition which affect business development
effort either negatively or positively. This element is to be considered uncontrollable, and they
could have impact in organization's overall performance. Some elements are from these are
inflation, economic growth, interest rate, social condition, government policy, climate change
and technological development etc.
PESTEL Analysis-
PESTEL Analysis is framework which is used for analyzing and monitoring macro-
environmental factor that could have profound impact on the performance of an organization.
This technique is specially used when company is starting new business or entering into foreign
marketplace (Giannoni, Alarcón and Vera, 2017). For analyzing the external business
environment of Sainsbury this tool is used which is described below-
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Political Factors-
The political factor which had affected the business of Sainsbury currently is imminent
Brexit. It states that England is no longer part of European Union, which lead to hike in import
rates. The product pricing of brand has been increased significantly and thus company could lose
its customers as they could switch to cheaper alternative wholesalers which are available in
market. The Brexit had an adverse effect on brand's product. Another factor is relationship
among England and Qatar in near future. Sovereign Wealth Fund of the Qatar is the largest
shareholder of 26% with Sainsbury and thus any political disruption among both two nation
could have dropped in market share of company.
Economic Factors-
Sainsbury is mostly dependent on the road-based transport as they need to transport its
product to all over UK. That means rising cost of the diesel and petrol could also bound company
to enhance their pricing of product (Iyer, 2019). It not only affect the lower income consumer but
this could lead to have lack of fossil fuel in near future and hence company had to search for new
transport mode for transporting their good across UK. Higher salary of the worker is economic
factor that affect Sainsbury. The movement for higher wage is gaining more interest across
whole UK and company is further striving hard to fulfil demand of their worker so that they
could retain its shareholder. The economic down fall in currency due to Brexit also had created a
situation of inflation in market. Thus purchasing power of consumer has been decreased and
consumer are not willing much to spend money which could directly affect the business of
Sainsbury. The sale of company will also reduce slalom with its revenue and profit margin due to
downfall in consumer visit to the store.
Social Factor-
Nowadays consumer are becoming more health conscious and moving towards obtaining
a healthy diet. So they are shifting towards opting the organic food so that they could stay
healthy and have balanced diet. Sainsbury further can include organic food items so that there
customer would not shift to other brand, and they could be satisfied with company easily. As
more and more women are in workforce which have resulted decline in the domestic meal
making. And so demand pattern is rapidly growing. Sainsbury for this has introduced a
marketing theme “Cook and Save” that promote product which are easy for cooking (Miklian
and Rettberg,2017). Thus, company easily implement changes according to the social trend and
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factor in market which is the main reason company is maintaining huge loyal base for its
customer and gaining huge profit and revenue further.
Technological Factors-
Sainsbury had recently launched and e Commerce store which is helpful for company to
move towards catering present tech friendly generation. This will be helpful for company to
enhance their performance and could render a better shopping experience to them. They could
also use modern data base analytical system that can be AI and big data by which company could
understand demographic need of the consumer and cater them. With the help of these analytical
method organization could increase their sale and run their marketing campaign better. Sainsbury
had also introduced an online food selling option for their customer where customer could easily
place order from home and further can collect it from nearby local store (Walle, 2017).
Technological advancement by company could result in decline of overall costing of the product
production. It is helpful for company to satisfy their customer with implementation of
technologies to their stores service so that more and more consumer could be attracted.
Legal Factors-
The Public Health England (PHE) has been introduced regulation for business in UK to
have cut in sugar content. The main aim of this tax is for reducing the content of sugary drink by
20% till 2020 (Gangotra and Shankar, 2016). This could impact own product of supermarket.
Company needs to modify its product so that they do not have to pay tax on this product and thus
could save money. Rules are also levied on companies for stop promoting salt, high-fat and sugar
food to children which are below the sixteen year of age. This could bound Sainsbury to promote
its product and services that are delivered to the customers. It also needs the company to take
approval from regulatory authority. When the authority approves product then only further it can
be launched in marketplace. This legal factor somehow bounds company to perform their
business activity extra ordinary. And thus this will affect the performance of company
directivity. Sainsbury should effectively imply these laws in their operation so that they could
perform their business operation smoothly.
Environmental Factors-
For being socially responsible the primary objective of any company is to keep
environment safe and healthy. Sainsbury had proved themselves as socially responsible
organization by contributing to 'reduce, reuse and recycle' approaches into there business
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activities. They are efficiently managing waste, packaging and recycling. Sainsbury had strive
hard to reduce resource wastage in their operation activity across UK by internal company's
initiative and collaboration with partner. In which they aim to reduce 20% in UK's drink and
food waste. They had also signed collaboration with Waste & Resource Action Programme
(WRAP) for minimizing packaging and waste of food to its all over stores. Then further surplus
food is to delivered to charities that address socio-economic aspect of their business (Budiman
and et.al., 2018Sainsbury had also set a target for reducing its operation carbon emission by
30%. For this company had introduced some initiative in favour of that are using refrigerant gas
in trucks which is utilized by company for transportation of goods. Thus, company is adopting
various sustainable practices in their business so that they could gain huge interest of consumer
towards company's product. Sainsbury could achieve its goal and objective effectively.
P2 Application of Micro-environment to the business. Mentioning influence micro-environment
has on business and its strategies with the help of SWOT analysis-
SWOT analysis-
SWOT analysis is planning process which help company overcome challenges and
determining what new lead are to be further pursued. The prime objective of SWOT analysis is
for helping company to develop full awareness of all factor which are involved in forming
business decision. It can be explained below-
Strength-
Sainsbury has large number of outlets across whole United Kingdom, supported by
strong distribution network which make surety to company that their product are easily available
to wide range of customer in timely manner. It has low cost structure which is helpful for them in
producing product at low cost and further selling them at low price so that it can afford by
consumers. Sainsbury is third biggest supermarket chain in UK which had 15.8% of market
shares. Company is famous for its quality products. It has over 1400 grocery store in all over the
UK and employ more than 150,000 individuals (Verma and Sharma, 2019). They had strong
financial position along with consecutive profit from past 5 years. Sainsbury has big portfolio for
its product, so they can render product in wide quantity of category. Organization also have
unique product offering to their consumer which is not provided by other competitors in
marketplace.
Weaknesses-
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Company conducts its business operation on the low margin food business which let
company to gain low profits. They have low margin on items and sell products at low rates
which overall let company to have low profits. The decision-making in company is centralized,
decision taken by team is to be approved by the certain official. Efficiency could be reduced in
operation and lead to have reduction in innovations. Morale of employees had been low because
of culture and politic which have been grown during years (Park, Sung and Byun, 2019). This
also indicated that company had high employee turnover rate as compared to other competitors
in market that's why they had to spend more on training and development of employees. The
current culture and structure of company result in failure of several mergers which aimed at the
vertical integration. There is lack of the proper financial planning at company regarding cash
flow, which lead to have certain circumstance where they need enough cash flow with them.
Sainsbury has not been conducted any market research across market in which it serves from last
two years. They are making decision on the basis of past two year old data, whereas consumer
needs and demands could change over a period.
Opportunities-
Sainsbury could enter into market of emerging company by joint venture or partnership
for exploring into new market and could sustain there for long term. Self checkout machine will
also be helpful for company in opening store for 24 hours that will boost up sales of stores
significantly. They can further expand into growing and emerging economies like Africa and
Asia etc., where they can have huge success opportunities and could grow their effectively. As
there is number of internet user across globe. So Sainsbury has an opportunity for expanding
their presence among market at online level by this they can easily interact with their customers.
New trend and growth in the sale of e-commerce industry which is helpful for Sainsbury to gain
revenue and profit by opening online store and making sale by these (Bıçakcıoğlu, 2018). Social
media can be utilized by company for promoting its product at global level across wide range of
customers. They can easily interact with consumer and further can collect feedback from them
by which they can have improvement as per the consumer's response. Customer across industry
are more health conscious and which is immensely growing among individual. So company had
an opportunity to manufacture product which is benefited to customer's health.
Threats-
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Sainsbury is facing major threat from its rivals which are present in marketplace. There
are number of the big player in grocery market of United Kingdom that is ASDA, Tesco, Lidl,
Morrison's and Aldi etc., In which Aldi and Lidl had changed the game, they are rendering
quality products to the customer at lowest price which is major threat for company. New
technological advancement by competitors among industry could cause a major threat as more
and more consumer could be attracted towards other companies and thus share of company could
be loosed. The fluctuating interest rate in nation which does not render a stable economic and
financial environment for the company (Parcu, Brennan and Glass, 2018). There are many
substitute products which are available in market, from which company had a major threat for
whole industry as current product consumption has been decreased. Rise in fuel price also have a
huge threat to company as trucks are used by them for transporting good across UK. Further if
price will be increase it will impact transportation mode of company and its product pricing
which will also be enhanced due to that. This will have direct impact on number of visitors who
visit store for purchasing. Changing consumer trend and taste also have major threat to company
as it could be changing time to time and is not constant that needs and demands of their customer
can be fulfilled.
P3 Explaining Porter's Five Force and then applying this to the chosen business for evaluating
how successful it is-
Porter's Five Force model is strategic management tool which is helpful for determining
competitive landscape in a particular industry. Each and every five force which is mentioned in
model and their strength helps strategic planner for understanding inherent potential for profit
across industry. Main strength for the force could vary among industry to industry that means
each industry is different with regard to its attractiveness and profitability (Bucheli and Salvaj,
2018). The stable structure of industry could be changed over the time. The Porter's Five Force is
followed as-
Power of buyers-
Sainsbury has large number of buyers but because of strong competition company have
high bargaining power. Other competitors in market is offering discounts due to which company
has to offer huge discounts on products. Low cost of products is available to customers. Due to
strong competition there is no control, of company over prices of products. Company is keeping
products of every brand in super Market. These brands are deciding the prices of products and
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there is not control of company over price of products. Product differentiation is problems for
company because there are large number of buyers which are buying products. Buyers are not
finding alternatives which will be producing particular products. So, bargaining power of buyers
is weak in industry. Income of buyers is very low. Customers want prices of products low along
with quality of products. Sainsbury can improve bargaining power of buyers by way of focusing
on innovation in products (Tallon and et.al., 2019).
Power of suppliers-
In supermarkets suppliers have low bargaining power because of many suppliers in
market. So, non complaint suppliers can be easily replaced by way of with new suppliers.
Sainsbury has power to get products at low prices which will increase their profit margin as
compared to competitors. Suppliers are more and so, suppliers have less control over prices of
products. Suppliers are providing products which are standardized, less differentiated and
provide products at low cost. These will make easier for company because they will get more
profit margin on single products. There is no substitute for product within industry so, these will
provide benefit for company. Other competitors of company is Tesco which has low bargaining
power (Gangotra and Shankar, 2016).
Threat of substitute-
There is threat of substitutes in retail industry low because it will include necessity in
emerging markets. Retail market is looking for new inventions and also customers are attracted
towards these new inventions. These inventions cannot be replaced easily and it is hard for any
company to replace these type of products. Sainsbury is selling large variety of products like
clothing, toys and many more. These products of other brand are sold by Sainsbury
supermarkets. So, there is not substitute of products for Sainsbury. These supermarkets are
selling wide range of products which will also include substitute products of different brands. So,
there is no threat of substitute of Sainsbury and also competitors are not facing threat of
substitute products.
Rivalry among existing firms-
Sainsbury is facing major competition from big four supermarkets that are Asda, Tesco
and Morrison which render similar product such as clothing, food item and electronic etc., at the
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marginal same cost which had developed good switching cost low. Thus, buyer could easily shift
to the other low price supermarket and could have shopping experience with that company. This
directly lead to have a cut-throat price war, product innovation and product advertisement
specially among the four big brands (Budiman and et.al., 2018). Along with that Sainsbury is
also facing major competition from the German discount store Aldi and Lidl which provide up to
40% of discount on their product to their customers which had significantly affected market
share of company. This situation also forces company to try to merge with the Asda so that they
can survive in cut-throat competition in UK food retailing industry.
Threats of entry/ Barriers to entry-
It is stated that low threat by company due to retail market structure in which 69.8% of
grocery market share is to be controlled and managed by 'big four' supermarket, they had intense
competition among the other small supermarket that are Aldi, Lidl, Waitrose, Iceland which are
trying to gain large market share. So there is no space for new entrant which can sustain in
market for long term. Any new entrant should offer high quality product at low price for
attracting consumer away from the low cost leader Aldi and Lidl who are already offering
products to their customer at 40% pricing discount. Intensity of the competition has made food
retailing market of UK is very much unattractive at moment when any new entry enters the
marketplace.
From the above analysis it can be understood that Sainsbury is doing well as compare to
other rivals (Parcu, Brennan and Glass, 2018). Company is effectively competing with its rivals
and implementing strategies accordingly so that they can compete with its biggest rivals Tesco,
Asda, Morrison's and Aldi & Lidl etc., Sainsbury while competing with these companies gaining
huge loyal base for its consumers and achieving its goal and objective effectively.
P4 Strategic planning
Strategic planning is considered as business activity that concentrates on implementing
such tactics that may strength the business operations. It is a helpful element that supports the
organization in improving such tasks that are not giving expected results.
Mission & objective-
Sainsbury aims to generate more revenues to become the market leader. Its mission is to
gain competitive advantage and be the market leader in this sector. Objective of Sainsbury is to
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raise its brand image to make the consumers loyal towards the brand. Vision and objective of
business aids management in making such strategies that may aid in gaining more opportunities
in near future so that enterprise can meet with its organizational goal.
Environmental scanning-
It is essential for company to analyses its market position. There are two main factors that
must be taken care: macro and micro. SWOT analyses helps in determining the actual internal
position of company (Tallon and et.al., 2019).
Strength
 Expansion strategies of Sainsbury
make it popular and successful. It
works with the small stores that have
limited products and then turn these
stores into big supermarkets. By this
way it increases its merchandize
categories that attract more consumers
towards the brand.
 Low cost product strategy make the
firm unique from other retail brands,
as it provides cheaper but high quality
goods to wide range of buyers.
 Its promotion strategies are another
strength of Sainsbury, it uses high
innovative pitch which attracts more
consumers towards the brand.
Weakness
 Company is facing brand switching
by consumers. As people move to
other retail brand frequently.
 Sales of Sainsbury decreased as
compare to last year which is the
major drawback of firm.
Opportunities
 Increasing rate of employment
enhances the spending power of
consumers, this can create opportunity
to firm to raise its profitability to great
extent.
Threats
 Increasing food prices create problem
for the Sainsbury because it has to
raise its product’s prices to manage
operational cost.
 High competition is also the threat to
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 Free trade has created opportunity to
expand business globally.
business.
PEST analysis-
 Political factor: Government has made changes in import rates that has created problem
for Sainsbury as prices of its goods has been raised hence enterprise can lose its number
of consumers that may decrease its sales.
 Economic factor: Changes in oil, diesel prices enhances pressure on business because it
will raise the transportation cost of Sainsbury hence overall profitability of firm will be
decreased. High employment rate will raise sales of the enterprise that would be better for
the firm to gain competitive advantage to great extent.
 Social factor: Culture affect the preferences of people, if there is change in consumer
behaviour then it may affect sales and profitability of firm to great extent.
 Technological factor: E-commerce stores of Sainsbury are providing amazing and quick
services to the wide range of consumers. Brand has used advance software to give
amazing experiences to its potential buyers. This gain attention of global consumers and
support the company in performing well in market (Giannoni, Alarcón and Vera, 2017).
Strategy formulation & implementation-
7P's model-
Marketing mix is operational or tactical part of the marketing plan. It is also known as
4ps and 7Ps. Marketing mix is marketing tool–product, place, price and promotion-which is
blend by company to produce response that is want in target marketplace. It is explained below-
Product-
Sainsbury is the largest supermarket chain which stocks over more than 30,000 product
line in which more than 20% goods are produced under their own label. Company had
diversified product range along with quality product so more and more consumer are attracted
towards company and its stores (Kanieski da Silv and et.al., 2017).
Place-
There stores are situated at place which is convenient to the consumer and thus customer
could easily purchase the product form store. Company also provide service of click and collect
where consumer could order the good online and further it could be collected by consumer from
nearby stores.
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Price-
The main aim of company is to deliver low pricing good with high quality. This is helpful
for company to gain huge loyal base for their customer and could sustain in market for long term
by satisfying their customer by proving them goods at affordable price (Gangotra and Shankar,
2016).
Promotion-
Sainsbury uses both ATL and BTL strategy for marketing its product in the consumer
marketplace. The ad campaigns are also launched by company on radio, newspaper, television,
leaflet and billboard so that their brand name could be build and wide range of customer could be
attracted towards company's store.
Process-
Sainsbury uses number of process in their business operation, and they had gain huge
success and gained their objective effectively with these processes. For achieving its market
share they had implemented it into marketing planning process.
People-
People are most essential element of any particular service or experience. Thus, consumer
plays a major role in these as there needs and demands are fulfilled by company or not. This
could also include people who are connected with company during its operation (Budiman and
et.al., 2018
Physical Evidence-
Sainsbury had main physical evidence which is presented in front of business. They must
look upon it that they are all right and could have positive impact on the consumer so that
consumer could gain interest over company's store significantly.
Segmentation, targeting, positioning-
Market segmentation is common method which is used for obtaining consumer specific
knowledge which could be helpful for succeeding business and satisfying needs & demands of
customers. Demographic segmentation would be used by company for segmentation as they can
easily analyze gender, age, ethnicity and income of individual. The young and middle age group
people targeted by company under the marketing strategies. This will be helpful for them in
building a positive image of offered product among consumer. And after that analytical data is
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collected from various market, competitor survey and customer and thus they can develop
statement where they stand in marketplace.
Evaluation and controlling-
For monitoring and controlling the business activity KPI is used by Sainsbury. Key
Performance Indicator is performance measurement which evaluate success of company for and
particular product or service in which it is further engaged. KPI is chosen by company with the
application of management approach that is balanced score card (Verma and Sharma, 2019). So
that right KPI could be used by company for monitoring and controlling their business activities
sob that they could effectively achieve goal and objective of company.
CONCLUSION
From the above study it can be concluded that business strategy plays a major role in
growth and development of each and every business. The company can be successful if effective
business strategy are implemented by them into their business operation activities so that they
could achieve their goal and objective significantly. Sainsbury could also gain huge competitive
advantage among its rival in marketplace by implementing business strategies in such a way that
they could place their product in marketplace effectively. Company's revenue and profit could
also be enhanced if proper plans and strategies are being implemented to business with proper
analyzation of market.
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