Table of Contents INTRODUCTION.....................................................................................................................................4 PART A......................................................................................................................................................4 Impact of macro environment on organization........................................................................................4 Analysis of internal environment and capabilities...................................................................................6 PART B......................................................................................................................................................9 Evaluation of the different types of strategic directions available to the organization.............................9 Justifying and recommend the most appropriate growth platform and strategies...................................11 Produce a strategic management plan with strategies, objectives and tactics.........................................12 CONCLUSION.........................................................................................................................................14 REFERENCES..........................................................................................................................................15
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INTRODUCTION Business strategy is basically the series of actions and decisions which the organizations undertake in order to accomplish their short as well as long-term goals. Sainsbury is primarily the renowned chain in supermarkets being established in 1869 by John James Sainsbury and headquartered in London, U.K. It is listed in London stock exchange and is currently present in more than 20 countries. This report gives a brief about Impact of macro environment on organization, Analysis of internal environment and capabilities, Porter five forces and developing strategic plan. PART A Impact of macro environment on organization PESTEL analysis Political factors The various political factors like tax rate, foreign exchange policy, and political stability affects the functioning of company in great way. Positive effect-Due to the effect of Brexit, tax rate in UK has been lowered down which has affected Sainsbury in positive way as the import and export expense of the company has been saved. Negative effect-Due to the termination of UK from EU, there has been hindrance in the political situation of UK and the government continuously changes which has impacted Sainsbury in negative way(Debra Paul and Cadle, 2019). Economic factors Numerous economic factors like employment rate, interest rates, foreign exchange rate impacts the organization to a great extent. Positive effect-Because of the Brexit, interest rates in UK has declined to more than 0.75% and thus has been beneficial for the company as they can easily take loans from banks and other financial institution at fewer rates.
Negative effect-The unemployment rate in UK has increased from 52.6% to 72.1% which has affected the company in negative way as it becomes difficult for them to hire talented employees. Social factors These factors comprises of health consciousness, cultures, attitudes, lifestyle etc. Positive effect-The increasing demand of consumers for organic and fat free food have been advantageous for the company and thus have raised their sale of organic food items to more than 32.1%. Negative effect-As the company operates in wide geographies, thus the consumers from different countries have different cultures and values which impacts organization in negative way as they have to be aware of all the cultures(Thompson and McLarney, 2017). Technological factors Various technological factors like online power, automation, R & D, innovation affects the Sainsbury in a great way. Positive effect-The increasing demand of consumers for the online products have resulted in the increase of sale of its web based operation to almost 25% in year 2017 and thus increased the revenue ratio. Negative effect-The requirements of the qualified technological professionals who have the knowledge of innovative technologies and software have somehow raised the expenses of company and hence have affected it in negative way. Environmental factors Different environmental factors like climate change, weather change, and pollution have influenced the company to a great extent. Positive effect-As the consumers now wants sustainable products like paper packaging, recyclable materials thus this have enabled Sainsbury to focus on the sustainability and thus raised their profitability ratio.
Negative effect-Due to the presence in different countries, company remains exposed to different environmental laws and affects their operations in negative because violation of any law can damage their goodwill Legal factors This constitutes patent, copyrights, employment laws, health and safety laws etc. Positive effect-The employment law in UK removed the mandate on the employee to work eight hours a day and this have increased the retention rate of employees in Sainsbury to more than 42.1%. Negative effect-Company remain bound to various legislation due to operations in wide number of countries and thus somewhat affects their functioning. Analysis of macro environment It is seen that the various factors like political, economic, socio-cultural etc impacts the organization in a great way and hence helps them tit hake their strategic decision. Based on this macro environment, Sainsbury designs their strategic plan and thus manage the operations. Analysis of internal environment and capabilities SWOT analysis Strength The main strength of the company is their high brand value which has enabled them to expand across the wide geographies and establish name in the market. Another strength is their high revenue ratio which has helped it to achieve competitive advantage despite various negative publicity. Weakness The most significant weakness which has dominated Sainsbury is its high attrition rate. As compared to the other organizations, the attrition rate of the workforce in company is much high. Another weakness is its limited investment in research as well as development. Even though company ahs high brand value, but still its spending in this sector is low(FATRICIA, 2016).
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Opportunities The new trends within behavior of consumer are the golden opportunity for the company through which it can create new streams of revenue and thus diversify the products. Besides this, the growing awareness of online channels opened new gate for the company to leverage the opportunity. Threats The strong presence of the competitors like Asda, TESCO has become of the threat for the company to survive in cut-throat competition. Along with this, the lack of talented workforce remains a threat for the company which might hinder its operations. VRIO framework This is basically the tool which assists the organizations to in securing the various resources which will provide competitive advantage and benefit to it in long-run Valuable This generally constitutes the resources which offer some value to the organization as well as to the customers and thus helps them in achieving competitive advantage. The financial resources of Sainsbury are highly valuable as it helps them to overcome the external threats and thus provides them with variety of opportunities. Rare This consists of the resources which are difficult to find and thus cannot be possessed by all the competitors. In short, these are the resources which are rare and cannot be found. The local food items of the company forms the rare resources and thus is not offered by other competitors in the market. This eventually helps them to gain an edge over competitors (Chatzoglou and et.al.,2018). Imitable This encompasses all the resources which cannot be duplicated or imitated by other competitors and thus are original. These resources are not acquired by all the firms or acquired
by only fewer firms. The brand value and patents rights of the organization are inimitable and thus cannot be copied or duplicated by other competitors. Organized Resources which are highly organized and thus captures the immense value comes under this category. These help the organization to sustain their competitive advantage and achieve their goals and objectives. The employees of the organization form these resources and thus are organized. Employees are trained and developed to attract the customers and serve them better. Evaluation of internal environment The internal environment helps the organization to assess their strength and weakness and also inform about the various opportunities and threats that will improve their operations and supply chain. It assists them to analyze their internal capabilities like skills, structure which will help them to achieve their long term goals. Porter five forces This is the framework which helps the organizations to assess the various competitive forces that will influence their overall operations. Threat of new entrants The capital requirement within this industry in which Sainsbury operates is generally high due to which the small firms are unable to set their business. This makes it complicated for the companies to spend such high amount on establishing units. Thus, this makes the threat of new entrant much low and weaker force. Supplier’s bargaining power There are low number of the suppliers in this industry within which Sainsbury prevails due to which their control and influence over the different prices of products is much low. This makes the supplier’s bargaining power much weaker and low and thus for Sainsbury this is advantageous as they can easily switch to other suppliers wherever they want. Bargaining power of Buyers
In comparison to the supplier’s number, figures of the customer within this industry are much higher and there are lot more customers than the suppliers. This makes the Customer’s bargaining power extremely strong and high as they can easily switch to other competitors offering products at low price. Thus, due to the high bargaining power, customers have a tight influence over the fluctuating prices of the products and thus this becomes a threat for Sainsbury. Threat of substitutes In the retail industry, there are generally low substitutes which are present and thus this makes this threat much low and weaker force. Due to the high level of differentiation, substitutes are scarce and the fewer one available are very expensive due to which customer does not easily switch to the competitors. Therefore, the substitute threat for Sainsbury is low and weak (Rothaermel, 2017). Rivalry between firms Within this industry in which Sainsbury operates has abundant competitors and due to thus the level of competition is intense and high. This makes the power of rivals much high and strong and thus is somewhat a threat for Sainsbury. Due to high degree of differentiation, firms are engaged in innovation due to which there remains the presence of unhealthy competition. Hence, degree of rivalry is strong for Sainsbury. Establishing Appropriate strategies It is seen that porter five force model is the strong tool which helps the organization to establish plans and strategies for improving their position in market. This framework helps them to analyze the competitive forces and based on these forces the organization brings necessary action for gaining competitive advantage. PART B Evaluation of the different types of strategic directions available to the organization. Strategic direction is a set of foundation ideas that provides consisting way which also helps to wear new formation. Strategic direction also guides business that how to perform and how to get success in the competitive market (Steiss, 2019). Grand strategy is a long-term strategy that consider every possible approach and tool at the success level. In order to be a competitive holder Sainsbury needs to have certain strategies to be strong in the retail market.
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Ansoff Matrix Model The Ansoff Matrix was developed with having four different strategies which enables business to analyze the risks associated with each other (Proskuryakova, Meissner and Rudnik, 2017). By the help to taking one of the strategies Sainsbury can better develop their own plans to reduce or to manage the risk of the business. Besides the purpose of this model is to plan the new strategies for growth. Market Penetration:Market Penetration is one of the common tactics which generally businesses adopt. In Such firms aiming to increase its market share. This is the strategy where business promote their product/services in the existing market (Noe and et.al., 2017). This strategy can be done by different ways such as sell product at lowest price just to attract new customers. Second way is marketing the product or services with extra promotional manner for brand recognition. And last one is acquiring a competitor’s strategy. So basically, this is less harmful and less risky strategy. For example, Sainsbury sell its existing product with another product just to offer buy one get one free to attract customers. Diversification:Differentiationisthebaseofnewstrategywhichiscalled diversification. This is exactly opposite strategy from market penetration. Where the marketer invents new product and sell into the new market. As compare to other strategies this is the most risk tactic because in this case company will not exactly sure that how buyers can react (Kavanagh and Johnson, eds., 2017). Diversification is also a very costly or huge investment way which sometimes company refuse to adopt. There are two types of diversification related diversification and unrelated diversification. Related diversification means there are involves some potential synergies to be realized between the existing and new product. Besides, Unrelated diversification adopted between existing ones or new ones. Market Development:Market development define the meaning that company expand their existing market by entering with the existing product or services. In other words, business wants to expand the business market and wants to enter into the different market with existing services. Such as catering to a different customer segment, entering into a new domestic market or entering into a foreign market. For example, Sainsbury wants to enter into the Germany market with the same outlets of the company.
Product Development:Last but not the least, Product development is the direct meaning strategy which define that firms develop new products to cater to the existing market (Sanghi, 2016).This strategy requires huge research development on the market just to know the exact customer and market demand. Also, it involves extensive research. Research technology is the great work to perform within the business market to gathered huge information of the market. Justification In order to expand the business Sainsbury should need to adopt one strategy out of two either take market penetration or market development (Punt and et.al.,2016). These two strategies is more helpful for the business success. Market penetration is the best option for Sainsbury as they require less resource or capital for the business growth. This can also develop the loyalty scheme. Launch price or other special offer promotions. Also, it increases the sales opportunities. Justifying and recommend the most appropriate growth platform and strategies. Growth strategies are the initiatives and new formulating business task that helps to better understand the business opportunity to better adopt the channel and new opportunity and task. Growth strategies also helps to create a new platform which usually take new area and development to make better understanding and new business opportunity and growth (Ginter, Duncan and Swayne, 2018). In order to enhance the business opportunity growth opportunities are the best way to create new opportunity and task to fulfill the main aim (Lurgi and et.al., 2015). This is the new game and opportunity which is helpful to make better understand the opportunity and task. There are many ways through which company can earn new revenues. In order to be in the market, it would helpful to better understand the market opportunity. Tactical growth platform takes less time to implement as they shorter term initiatives and both the initiatives and the results are based on the current budget year of the particular business. From the above-mentioned strategies Sainsbury should need to adopt Market penetration which is a good option to measure the market and analyze the customer needs and wants. It enables to utilize the market penetration strategy to attempt to enter a new market (Bryson, 2018). The goal is to get in quickly with product or service is quite to able to measure the good outcomes and new business gain and objectives. Aggressive pricing is a very common tactic. This strategy may work for the company to get into the market again with great efforts and growth. This strategy is
less harmful and less risky in order to gain the business and also gain different opportunity and goals. Additionally, once company might be fulfilling the company aims and objectives to be more productive. Additionally, this is less aggressive strategy and way to fulfilling the business opportunity and better understanding targets. Market penetration is the best strategy which is more aggressive marketing campaign and distribution strategies. For example, direct mailings ads (Cortimiglia, Ghezzi and Frank, 2016). Also penetrate the market by saturating the product in the market. Advantage of market penetration, it may cause quick diffusion and adoption of the product in the market. If the more study and new business opportunity and growth. In order to create a new business in the market company should need to start with penetration which is frequently which is used to measure to determine whether the product which is capturing fixed percentage of the market. Market penetration is the new big opportunity and task to gain the new revenue and make the best services and products for the customers (Miller, 2016).In both, don’t cases don’t overdo it because it may seem suspicious too much may indicate to low quality and high prices might be seem as a company that has only one objective which might be make customers doubt the form of new quality, fairness and trustworthiness. There are many other benefits that company could gain from this strategy. Such as sales volume, brand recognition, etc. As compare to others it is the safest and emerging business strategy which is very useful for the company and leading business growth channel. Growth Strategies is the continuous activity for the business to make the business more reliable business task to gain business opportunity. Produce a strategic management plan with strategies, objectives and tactics. Strategic Plan Executive Summary Present strategic plan is based on new strategies where Sainsbury has been planning to expand its business into new market which is Germany (Alaskari, Ahmad and Pinedo-Cuenca, 2016). In order to open a new market study has been concluded the vision, mission, STP, PESTLE for market research and monitoring and Evaluation techniques. Objectives To expand the business revenue by 20%.
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To increase the company brand recognition. To enhance the business market share at global level. PESTLE Analysis Political:For expanding the business market Germany is the option for the company as it is politically stable country. It might be helpful for the company to make policies and assured of stability. Economically:Economically Germany is the 5thlargest economy in across the world. Thus, it is a positive sign for the company (Hare and et.al., 2017). It can be the more creative and forming business objectives for the company. This country based on modernization. Social:People of Germany is very adaptive in nature that is very good for brands who wish to expand their business in Germany. Technology:Germany is very diversified and, in many sectors, it is global leader. This can be the threat for the Sainsbury to adopt new advanced services. Legal:Legal aspect of every country is varying accordingly. Sometimes it might be risky for the new businesses to adopt. To not follows the proper regulations, it might be hurt company reputation. Environmental:Environmental factor is the significant drivers who can affect company brand if in case company indulge with unfriendly activity (Ng and et.al., 2015). STP: Market Strategy Segmentation: Segmentation basically belongs to the place and location. Sainsbury planning to expand business in Germany market. Targeting: Sainsbury indulge with grocery products for which they basically target family friends and all income group people. Positioning:Tomakebrandrecognition,Sainsburycanoffernewdiscountsandnew advertisement to recognize their product or services (Barrett, Oborn and Orlikowski, 2016). Monitoring & Evaluation Techniques
Feedback from employees or customers:To get review or check how much new plan will be implemented properly. Get feedback from employee or customer is the best way to make further corrections. Evaluate performance management:Review actual performance with desired results to know much plan will be implemented in proper manner. It helps to review the whole plan. CONCLUSION On the basis of above describing report it has been concluded, business strategy is the most essential things that has to be done or implementing by the organization. Study defined internal or external business factors to analyze the business market. In order to defined the aim of the research study explored the business market analysis tools such as PESTLE and SWOT analysis. In order to evaue the different types of strategic directions study explained the model Ansoff matrix model where the report explained that the for-company Market Penetration is the best option for the company to carry out the results. Also, study justified the current reason of choosing business results. At the end of the report segment study also produced the new strategic plan for the company development.
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