Business Environment Analysis of Sainsbury's - SWOT & PESTLE

This report provides a comprehensive analysis of Sainsbury's business environment. It begins with an introduction to Sainsbury's, the second-largest supermarket chain in the UK, and then delves into a detailed literature review. The report utilizes SWOT and PESTLE analyses to evaluate Sainsbury's internal strengths and weaknesses, as well as external opportunities and threats, and the political, economic, social, technological, environmental, and legal factors affecting the company. The report also examines the impact of Brexit on Sainsbury, discussing the challenges and obstacles the company faces, such as import costs, inflation, and potential delays, while also considering potential advantages. The analysis covers Brexit's effect on supply chains, consumer behavior, and the overall market, concluding with a discussion of the measures Sainsbury is taking to mitigate the negative impacts and navigate the changing business landscape.

CONTEMPORARY BUSINESSES ENVIRONMENT

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
LITERATURE REVIEW................................................................................................................3
SWOT ANALYSES....................................................................................................................3
PESTLE ANALYSES.................................................................................................................4
TASK 2............................................................................................................................................6
BREXIT AND ITS IMPACTS........................................................................................................6
REFERENCES..............................................................................................................................11

INTRODUCTION
Sainsbury is the second largest chain of supermarket in the United Kingdom holding more
than 15% share of supermarket sector . The company was being founded by John James
Sainsbury in the year 1869 as a shop in London. Sainsbury became the largest supermarket chain
in 1922. Sainsbury was the largest supermarket chain until 1995 when Tesco overtook it to
become the market leader. In this report we have considered the internal as well as external
factors of the Sainsbury using SWOT and PESTLE analyses that influences the business
environment in the UK. There is also a brief review about how the company is affected by the
Brexit situations and what are the future impacts on the company in which there is a whole
explanation about the problems and obstacles the company will face and what are the advantage
the company might have due to Brexit.
TASK 1
LITERATURE REVIEW
This is a brief discussion about how Sainsbury is affected by the internal and external
environment:
SWOT ANALYSES
STRENGTH
According to the author, Sainsbury offers a wide variety of product and services which include
clothing, food, financial services, toys, stationary, homeware and cookware so this vast portfolio
of product and services acts as one of the major strength for Sainsbury. The company uses
excellent marketing strategies to promote its products and a strong and experienced workforce
dedicated toward working makes the company very competitive in the market. The author also
stated that Sainsbury is known for its quality product and this strength has created a strong
goodwill among the customers. The company has been consistent with its performance and has a
strong balance sheet.
WEAKNESS
As per the author Sainsbury is starting to lose its market share in the previous years due to
excessive competition and high debt levels leading to decline in the profitability. The company
main competitions are Tesco, ASDA and Morrisons which has led to cut in the profit margins of

Sainsbury. The author stated that low margin are especially shown in the area of food business
for Sainsbury. The company average investment in research and development is lower than its
other competitors especially Tesco and the author added that Sainsbury has not been very good
at forecasting the future opportunities regarding rise in the demand, this has led to high inventory
days compared to other player in the market.
OPPORTUNITIES
In accordance with the author Sainsbury has emerged with some opportunities in recent time.
The new taxation policy of the government provided company's like Sainsbury with ways to
increase their profitability. The author also stated that the government agreement has led to new
market being available to Sainsbury, the company can explore these market to increase its
market share. In this ever changing technological environment the company also have the
opportunities to use online websites to reach the consumers all over the world with just a mouse
click. The author also added that the inflation rates are low so the company has the chance to
improve its cash flow position.
THREATS
The author stated that Sainsbury have a threat to the existing with the new regulations under the
Paris agreement. The demand for highly profitable products are seasonal and any unlikely event
during any of these season can affect the company's profitability in the future. The new
technological changes in the environment can disrupts the working of Sainsbury. The author
added that since Sainsbury is a multi national company the laws and regulation of different
countries must be followed or serious penalties will be face by Sainsbury. The company also
posses threats from the local distributors if they gave a high influence over the local customers.
Rising prices of raw material are also a problem to Sainsbury profitability.
PESTLE ANALYSES
POLITICAL FACTORS
As per the view if the author the major political factors affecting Sainsbury are the current
government debts and the consumer debts are too high. It is becoming very difficult for
Sainsbury to survive under these unstable political conditions. The author further added that the
UK political relations with Qatar has also impacted the Sainsbury profitability and the current

major political change of Brexit had significant impact upon the working of Sainsbury. Despite
all these Sainsbury has been able to sustain steady growth in the market.
ECONOMIC FACTORS
The author stated that economic factors including both micro and macro economic factors ehich
are demand, cost, profitability, unemployment, inflation rates, interest rates etc., have affected
Sainsbury significantly. These economic factors have majorly affected the food products of
Sainsbury as the result of high unemployment and high prices in the food products. So before
any further expansion Sainsbury should consider all these factors and invest in the areas where
they already have their stores to face these challenges.
SOCIAL FACTORS
According to the author the social factors are those which changes with the changing customer
Needs. The customers now need all the products under one roof. The other social factors which
Sainsbury should keep in mind are increasing female workforce, gender equality, safe and
Healthy environment to work in etc., the author added that these factors contributes to the long
term growth of the company and build its brand image in the eyes of the customer.
TECHNOLOGICAL FACTORS
As per the author the technological advancement had a positive impact on Sainsbury. This was a
great opportunity for the company to expand its business all over the world. Sainsbury online
food delivery service is expanding at a fast rate. The auithor added that the company has
witnessed a growth of 25% in the sales after it started selling its product online. Also, the online
service is available to more than 85% of the UK households.
ENVIRONMENTAL FACTORS
The author stated that Sainsbury has taken initiative of 'REDUCE, REUSE, RECYCLE'
approach for reducing and managing their waste. The company is also trying to reduce the
carbon footprint as much as possible. These environmental factors helps in building brand image
and attract environment conscious customers.
LEGAL FACTORS
The author stated that The author stated that Sainsbury should follow the laws and regulation o
should follow the laws and regulation of the country it is operating in or otherwise it will face
serious penalties for breaking any rules and this might affect the profit directly.

TASK 2
BREXIT AND ITS IMPACTS
This is an overview about the current position and the debates regarding Brexit-
Brexit refers to British exit from the European Union, the UK joined in 1973 and it would be the
first to leave the EU bringing an end to a 46 years British partnership. Currently Mr Johnson ther
PM of UK has been renegotiating the existing deal. The Brexit deal has been renegotiated 3
times before and the latest extension has been until 31st January 2020. Different analyses have
shown that Brexit would end the partnership with EU there is a great impact on the consumer as
62% of all the fresh food is imported from EU, 46% of the of imported food arrives from Spain
and other 22% from Netherlands. A report has shown that after Brexit around 7000 shoppers will
unlikely to remain in the market and the shoppers have already shown concern about the
recessionary behaviour in the market. The British retail consortium trade body ax warned that the
retail prices are likely to rise as the major supply from EU has been cut. The retailers expressed
particular concern about fresh foods, saying it is impossible to stockpile produce such as salad
and fruit. Major supplier have said that retailers typically have no more than two week stock.
Brexit would result in major inflation rises to about 5.1% from 2.4% in case of no deal Brexit.
Currently retailers are taking extra ordinary measures to prepare if the Brexit deals comes into
pictures. These measures include stockpiling of non perishable goods, using machine learning
models, retailers are quietly de listing and simplifying imported ranges of products, these
measures are helpful during the crisis situations in the market.
Impact of Brexit on Sainsbury
A no deal Brexit will severely disrupt the supermarket in the United Kingdom. The market of
Sainsbury is being slowly eroded by the discounters Aldi and Lidl . The Brexit will threaten
with severe supply chain disruption and higher costs. Sainsbury has already warned the United
Kingdom government if they leave the EU without a trade deal, then they would close the supply
of the food which would result in crisis situations in UK. Sainsbury CEO have already
commented that if the tariffs or other barrier is increased then they would increase their prices as
these things degrades the freshness of their products and among all the other product food is the
biggest problem for the UK as they are perishable which means they cannot be stored for a long
period of time and food has the greatest impact as a result of Brexit. On the contrary Sainsbury

has warned about shorter delays at ports and borders as these delays cause problems to all the
supply chains. These problems can only be solved by Sainsbury and the United Kingdom
government working together and if they don't work together the company, the government and
the final customers all will suffer as it would create a situation of crisis.
OBSTACLES REGARDING BREXIT
IMPORT COST
Sainsbury will be facing higher import cost because of the fall of value of pound against dollars
and the euro, as well as there will be rise in the price of the commodities especially all the food
products. Sainsbury’s has warned that the impact of cost pressures from the post Brexit vote
decline in the pound remains uncertain as it reported a slight fall in sales at its supermarkets.
Since the imports regulations are still not clear as the term and conditions are not agreed
Sainsbury is trying to exert as much pressure it can to reduce these import costs as much as
possible. If these import cost rise significantly then Sainsbury will lose its market share and the
customer will switch to the competitor Tesco and Morrisons.
INFLATION
Due to Brexit, a report has shown that inflation has just been doubled the last month up to 1.4%
year on year. These inflation rates lead to increase in the prices of the product provided by
Sainsbury, and in return lead to decrease in the sales. Sainsbury has reported a decrease of 0.5%
fall in the sales in the supermarket in just 3 months from March 11. This is because of very tough
competition existing in the market, as Tesco and Morrisons are edge to edge competing with
Sainsbury. The share price of Sainsbury has fallen by 3% in the 1st quarter of this year when the
rivals slipped away. Mike coupe, the CEO of Sainsbury said that the company has done a
remarkable job in riding out the storm of Brexit by continuing building pressure on the
government and minimizing the impact of these price rise on the consumer of Sainsbury. These
inflation rates have impacted the cost price pressures and made the market very competitive to
trade in.
DELAYS
These obstacles like tariffs and import duties has created an obstacle in providing fresh food to
the consumers. Sainsbury has made it clear to the government about this as after Brexit the
company would face more of these problems because of more of these duties coming into the

picture. The CEO Mr Coupe said that they are currently transporting vegetables from southern
Spain which takes 24 hours to arrive. If these vegetables takes more than the required time then
these might get rotten and for a large company like that of Sainsbury this may lead to large losses
and conditions like that of Brexit this might lead to crisis in the country as there will not be
enough supply to fulfill the demands of the customers. So the government should co ordinate
with all the big supply chain to remove these delays. As without both the Sainsbury and the
government coordination these delays will keep going on and there might be a situation where
the country is in crisis like that in 2008.
CRITICAL BREXIT ANALYSES
Brexit may help the country experience immediate cost savings
The main reason for the Brexit was that the country spending was more than the benefit gained
from the EU, in 2016 UK paid £13.1 billion and received just £4.5 billion which has led to
direct loss of £8.6 billion. The government is trying to save these costs and invest these in
industries like that of Sainsbury which will reduce their cost in the longer run and help them
grow more by providing better quality of goods and services to their citizens.
Brexit would shift the emphasis of trade for Britain
Separating themselves from EU will help Sainsbury to negotiate with their buyer which was not
possible before. Also, the major companies like that of Sainsbury will have a say in finalising
the deal with the supplier so they can try to get the best deal while trading and this might save
Sainsbury a lot of cost which was not possible before Brexit.
Brexit will increase job offers
The company like Sainsbury will help creates a lot of jobs as after Brexit all the jobs related to
trade, policies, procedures, or activities right now. This is estimated to create around 3 million
jobs in the United Kingdom. Sainsbury’s will employ all these jobs so it can negotiate the terms
of import duty with the government. Sainsbury can create more jobs in the near future in the
coming months and years ahead. This will lead to creation of brand image as the company
provided the people with jobs at the times of crisis and in turn may increase the sales of the
company.
Brexit would reduce the foreign investment

With Britain separating itself from the European Union the foreign direct investment would
definitely reduce and this would lead to Sainsbury struggling to obtain finance from these foreign
companies. The country would cost billions after the Brexit happens and this would impact the
company like that of Sainsbury where they are already facing a lot of challenges this would add
up to their problems.
Brexit would increase the pressure on Sainsbury
With the rise in the import rates and inflation rates the prices will definitely rise so Sainsbury
have to take measures like stockpiling etc., to control the pressure of these price rises otherwise
the customer will switch over other supplier like Tesco and Morrinsons. So to maintain their
market share of the customer the company should adopt all these price controlling techniques to
fight the price rise or they will start to lose their customers.
Brexit would increase supermarket's structural woes
Sainsbury would also have to face the pressure of the increase rent rates, depreciation rates etc.,.
these wee being highlighted in one of the interim report if Sainsbury. Furthermore, the
company's asset has been degrading of the increased rate of depreciation. This has caused a
setback for Sainsbury and have to tackle these barriers too. Sainsbury should be prepared to
invest as they may require large finance be tackled.
Brexit can reverse the protection of food rights and regulations
Most of the food standards that are in place are in accordance to the European Union. Brexit
would lead to change in these standards and introduction of new standards this may lead to
Sainsbury to change its way of working which may cause additional cost to be incurred. Some
of the measure included animal welfare standards could shift once Brexit begins its journey
forward may be in the favour or against Sainsbury so the company should always be prepared to
face any challenges from the implementation of Brexit.
RECOMMENDATIONS AND CONCLUSION FOR BREXIT
The conclusion for Brexit is to serve best for companies like that of Sainsbury. The decision is
taken to for the interest of UK economy. Although Brexit will pose formidable issues concerning
the transactional arrangement for any future cooperation between United Kingdom and European
Union, and These do not have easy solutions but we identify ways to ameliorate them, and stress
the importance of measures being taken and communicated well ahead of the date of Brexit. As a

result of Brexit, leaving the Union will very significantly affect the companies and there is no
conceivable agreement that could be reached between the United Kingdom and the EU that
would allow it to benefit from access to the internal European market but exclude it from the
obligation to respect the free movement of people.
The recommendations are that the government should coordinate with companies like
Sainsbury so that they can work together to fight all the crisis that happens after Brexit. The
European Union must contribute to generate stability and confidence around the borders so as to
do the working smoothly in the United Kingdom. Another recommendation is that the Sainsbury
should also work with the new government legislations regarding Brexit and should take some
pressure on themselves as if they don't work together the after effects would be disastrous.
CONCLUSION
In this report I have concluded giving a brief discussion about internal and external
environment affecting Sainsbury and for that I have used 2 models SWOT and PESTLE, with
the help of these two all the factors affecting Sainsbury are being highlighted in my report in the
first task. Then in the next task I have talked about the current position of UK regarding the
Brexit position and the debates the countries are facing, then I have discussed some obstacles
that UK might face before during and after the implementation of Brexit. After that I have
provided a critical report on the effects of Brexit and the impacts of these on the near future. At
last I have provided with the conclusions and recommendations that Sainsbury and the
government of UK might use, these conclusions and recommendations are based upon my
findings in the report.

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