Corporate Strategy And Business

Running head: CORPORATE STRATEGY AND BUSINESS
CORPORATE STRATEGY AND BUSINESS
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Introduction
Owing to rapid globalization throughout the world, business organizations have engaged in
the strategizing of effective means by which they can induce growth and development of their
operations and activities. There are various types of corporate strategies that can be adopted
by business organizations for the purpose of propelling the growth of their business activities
(Ismail 2016). These strategies can be identified to be market penetration, market expansion,
product expansion, diversification and acquisition or mergers. The strategy of market
penetration involves the selling of existing products in the same market for the purpose of
expansion or increase of market shares. The strategy of market expansion refers to the
introduction of existing products in new markets to induce increase in revenue. The strategy
of product expansion refers to the addition of new products in the existing market whereas
the strategy of diversification refers to the introduction of new products in new markets. The
strategy of mergers and acquisitions refers to either partnerships or purchase of one company
by another in order to expand the line of products and thereby its market share (Johnson
2016). The essay will further focus on the application of such growth strategies in the
business operations of organizations, which currently operate in the world. The particular
case that will be analyzed further pertains to the merger between the two supermarket
companies operative in the United Kingdom, namely Sainsbury and Asda
(About.sainsburys.co.uk 2020). For the purpose of an analysis of the growth strategy of
merger adopted by them, the external business environment of the two companies will be
evaluated in details in order to identify the opportunities and threats that the companies may
have faced, and which led them to the adoption of this particular growth strategy.
Furthermore, the key drivers for the implementation of the merger strategy will also be
identified along with the measurement of the suitability, accessibility and feasibility of the
merger strategy using the SAF framework.

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Discussion
Overview of Sainsbury
Sainsbury plc is identified to be one of the largest supermarket chains in the United
Kingdom. The company was founded by John James Sainsbury in the year 1869, with the
first shop being established in the Drury Lane of London. The present headquarters of the
company is located in London, in the United Kingdom. The company has divided its business
operations divided into three broad section namely the Sainsbury Supermarkets Limited,
Sainsbury’s Argos developed after their acquisition of the British catalogue retailer Argos
Limited, and the Sainsbury’s Bank (Sainsburys.jobs 2020). The vision of the company is to
become one of the most trusted retailers by harnessing the talents of its employees
incorporating diversity and creativity in their business processes. The mission of the company
is to make investments in the training and development of their employees so as to be able to
offer the best shopping experiences to their customers (Sainsburys.jobs 2020). The
organizational culture of the company is identified to be rewarding, exciting and enjoyable
for the employees and other members of the organization, making the company a ‘Great
place to work’.
Overview of Asda
Asda Stores Limited is identified to be a British supermarket and retailer with its
headquarters in Leeds, in West Yorkshire. The organization was established in the year 1949
by Peter Asquith, Fred Asquith and sir Noel Stockdale. Among the various services offered
by the company to its targeted customers, the most important are identified to be retail,
provision of mobile phone services through the use of the British EE network, petrol filling
stations and financial services. The company is a subsidiary, with its parent company being
the American multinational retailers Walmart Inc. The mission of the company is to ensure
maximum customer satisfaction through the provision of high quality products and services

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and maintaining a pleasant environment for living. The vision of the company is to become
one of the most trusted retailers (Asda.jobs 2020). The organizational culture of the company
is aimed at providing the employees and other members of the organization with the freedom
to utilize their talents, capabilities and skills so as to provide the customers with the best
quality of products and services (Corporate.asda.com 2020). Along with this freedom, the
employees are also provided with adequate training development and support so as to bring
about their personal and professional development.
Analysis of External Business Environment
An effective analysis of the external business environment in which an organization
operates is essential for the identification of the various opportunities that can be utilized by
them as well as the threats that they may be faced with from various external forces
(Akpoviroro and Owotutu 2018). There are certain frameworks that can be applied in order to
evaluate the external business environment of Sainsbury to evaluate the scope of the merger
strategy that has been adopted by it. The external business environment of Sainsbury will be
further evaluated using the frameworks of the PESTEL analysis and the Porter’s Five Forces.
PESTEL Analysis
The framework of PESTEL provides for a strategic identification of the various
political, economic, social, technological, environmental and legal factors operating in the
external environment of a business organization, which may ultimately result in affecting its
business activities and operations (Shtal et al. 2018). The analysis of these external forces, as
operative on Sainsbury plc., can be evaluated to be the following:
 Political factors – The political factors affecting the business operations of Sainsbury
include the political stability and level of corruption in the United Kingdom, which
are both low (TheGlobalEconomy.com 2020). The recent event of Brexit has also had

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influences on the foreign policies and trade relations of the country with other
countries in which the company operates which acts as a threat for the company.
Other factors include the rising GDP or gross domestic product of the country,
regulations pertaining to health and safety of the employees and quality standards of
products and services (Statista.com 2020).
 Economic factors – The economic factors affecting the business operations of
Sainsbury pertains to the economic condition of the country after Brexit, inflation in
the prices of food, disposable income and purchasing power of the targeted customers
and levels of employment. The economic slowdown of the country after the event of
Brexit has led the company to face comparatively lower demand for their products
and services due to the reduction in the disposable income of the customers (Onaran
and Guschanski 2016).
 Social factors – The social factors affecting the business operations of Sainsbury
include changes in the tastes and preferences of the customers and their tendency to
engage in online retail shopping. Furthermore, other social factors including the level
of education among the customers and the general consumer behavior are important
aspects that determine the nature of business activities to be undertaken by the
company, thereby posing to be an opportunity (Yang and Chen 2018).
 Technological factors – The technological factors that affect the business operations
of the company include the availability and accessibility of the customers to online
mediums, internet connectivity and bandwidth, level of technological infrastructure
and advancement required for efficient means of production and the efficiency of
technology in the supply system (Pantano 2014). The high level of technological
infrastructure available in the United Kingdom, act as an opportunity for Sainsbury.

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 Environmental factors – The environmental factors affecting the operations of
Sainsbury in the United Kingdom include the various laws and regulations pertaining
to the maintenance of standards in business practices, laws regarding carbon footprint
and emissions and management of wastes (Graham and Potter 2015). Furthermore,
the level of awareness among the customers regarding the importance of sustainable
business activities also plays the role of an important determiner for the business
activities of the company.
 Legal factors – The legal factors affecting the business operations of Sainsbury in the
United Kingdom include the laws and regulations pertaining to the maintenance of
quality standard of the products and services, wage regulations, excise duties, taxation
policies, laws pertaining to the protection of consumer rights and the rights of the
employees (Moss 2015).
From the above analysis, it can be deduced that the opportunities available to the
company from its external environment are high level of technological infrastructure,
adherence of the company to sustainable business practices and the potential to satisfy the
demands of the customers through the vast range of products and services offered by them.
The threats posed to the country include the economic instability of the country after Brexit,
low disposable income of the customers and price inflation.
Porter’s Five Forces Analysis
The framework of Porter’s Five Forces as theorized by Michael E. Porter, provides
for a strategic analysis of the competitive environment in which a business organization
operates. The various factors that are considered and evaluated with the help of this
framework include the threat of new entrants, threat of substitutes, threat of bargaining power
of the suppliers, threat of the bargaining power of the buyers and the threat of competitive

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rivalry (Dobbs 2014). An evaluation of these forces will help in the identification of the
opportunities and threats that the business organization may be faced with:
 Threat of new entrants – The company faces a moderately now threat of new
entrants as the presence of major brands in the industry does not facilitate the growth
of new companies in the market. The investment required to establish business
operations in the retail industry is also high, which does not facilitate the entry of new
companies in the market.
 Threat of substitutes – The company faces low threat from substitutes as it offers a
wide range of products and services which effectively meet the changing demands,
tastes and preferences of the customers.
 Bargaining power of the suppliers – The company faces a low threat from the
bargaining power of the suppliers because of the presence of a large number of
suppliers in the market. Furthermore, the huge presence and share of the company in
the market does not pose the bargaining power of the suppliers as a threat to the
company (Ali 2014).
 Bargaining power of the buyers – The company faces a moderate to high threat
from the bargaining power of the customers, because of the presence of a large
number of competitors in the retail market (Perino, Panzone and Swanson 2014).
Switching costs are also quite low for the consumers, thereby providing them with the
choice to switch between brands on the basis of product and service quality or pricing.
 Competitive rivalry – The company faces a significantly high threat from the
competitors or rivals present in the market. The retail industry in general is highly
competitive, with the presence of a large number of companies from different parts of
the world operating in different regions (Thomassen et al. 2017). The major

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competitors of the company can be identified to be Walmart, Asda, Tesco, Amazon,
Aldi and the like.
From the above analysis regarding the competitive environment in which the
company Sainsbury operates in, it can be deduced that the primary competitive forces that
pose a threat to the business operations and functions of the company are the threats of the
bargaining power of the customers and competition from the rivals in the market.
S.W.O.T. Identification
The SWOT framework provides for an assessment of the internal strengths and
weaknesses and the external opportunities and threats that may be faced by an organization
during the course of its business operations and functions in the industry (Gürel and Tat
2017). From the above discussion regarding the analysis of the external environment of
Sainsbury, various strengths, weaknesses, opportunities and threats can be identified. While
the opportunities and threats have been identified through the evaluation of the external
environment. The strengths and weaknesses of the company have been identified from its
internal business operations and are listed as follows:
Strengths Weaknesses
1. Positive brand identity and image in
the market
2. Large market share
3. High rate of customer satisfaction and
brand loyalty
4. High quality of products
5. Affordability of products and services
6. Global presence in the retail industry
1. Low product diversity as compared to
several competitors
2. Increased investments in resources
3. Reduction in profit margins to remain
competitive
4. Poor demand forecasting
5. High rate of attrition in workforce
6. Limited success outside the scope of

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their core business
Opportunities Threats
1. Product diversification
2. Expansion in new markets
3. Partnerships with other retailers to
obtain a greater share in the market
and increase the customer base
4. Sustainability in business practices to
improve brand perception
5. Improved promotional strategies
through online mediums
6. Making innovations and
advancements in cost efficient and
resource efficient technology
1. High competition from rivals like
Walmart, Asda, Tesco
2. Economic instability in the United
Kingdom owing to Brexit
3. Decreasing disposable income of the
customers
4. High investments required for
technological advancements
5. Changing tastes and preferences of
the customers and low switching costs
6. Price inflation
VRIO Analysis
VRIO analysis provides a framework for the evaluation of the resources available to a
business organization that can be utilized efficiently for the purpose of obtaining and
maintaining a competitive advantage in the market (Song and Sung 2015). The acronym in
the framework stands for the evaluation of the dimensions of value, rareness, imitability and
organization of the resources of the company. The evaluation of the resources of Sainsbury
can provide an identification of the key competencies of the company for obtaining a
competitive advantage in the market.
 Valuable – The resources that can be identified to be valuable to the company include
financial resources, highly differentiated local food items, employees of the

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organization, patents and distribution network. Among these resources, the financial
resources and human resources of the company can be mentioned as most important
as they ensure the smooth and efficient operations of business activities.
 Rare – The strength of the financial resources available to the company is rare and
cannot be obtained by many companies operating in the retail industry. The talent
pool and knowledge of the employees is also a rare resource that is not available to all
of its competitors.
 Imitable – The resources of the company that can be regarded as imitable include the
differentiated local food products which can be obtained by other organizations.
Furthermore, the technology used by the company can also be imitated by the major
competitors in the industry.
 Organization – The resources available to the company are organized in a manner so
as to provide maximum value to the business and thereby the targeted customers
through the provision of high quality goods and services at low prices. The
organization of the distribution network of the company also happens to be an
important aspect of its operations.
Core Competencies for Competitive Advantage
The core competencies which can be identified with regards to the resources that can
provide the company with a competitive advantage in the market include the highly skilled
employees, financial resources, well structured distribution network and cost and resource
efficient technology. These resources can be efficiently utilized by the organization in order
to obtain and maintain a competitive advantage in the market and thereby propel the growth
and development of the company. The growth strategy adopted by the company pertaining to
the merger with the retail company Asda can prove to be beneficial with respect to the core
competencies of the company. It is so because the financial resources can be utilized for the

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purpose of training and development of the employees and staff at Asda after the merger
thereby increasing the talent pool of the organization. Furthermore, with the additional
resources of Asda and the well knit distribution channel and technological resources of
Sainsbury, the company can seek to increase the share of their market and gain a competitive
advantage.
Key Drivers of the Strategy
The merger strategy that has been adopted by Sainsbury in order to propel its growth
in the retail market of the United Kingdom, entails within its purviews several key aspects.
These aspects include the changing preferences of the customers, advancements and
investments in technology, efficient utilization of available resources and high competition
(About.sainsburys.co.uk 2020). In this regard, the key drivers of the growth strategy of
merger adopted by Sainsbury include the following:
 Potential for increase in the market share of the company
 Increase in the resources of talented and skilled employees
 Efficient utilization of financial resources
 Potential for gaining a competitive advantage over Amazon (Butler 2020)
Therefore, it may be mentioned that the strategy of merger between the two
companies Sainsbury and Asda as proposed by Sainsbury has the above mentioned driving
factors, which ultimately lead towards the attainment of a competitive advantage in the
market through the increase of the market share of the company.
SAF Evaluation
The SAF evaluation model provides a framework for the analysis of the suitability,
acceptability and feasibility of a particular business strategy adopted by an organization
(Abdalla 2015). In this case, the strategy to be evaluated is the growth strategy of merger with

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Asda as has been adopted by Sainsbury. The SAF evaluation of the strategy shows the
following results:
 Suitability – The strategy can be regarded as being suitable as it aids the company to
avail the opportunities that are present in the external business environment including
the acquisition of increased market share and gaining of a competitive advantage over
major rivals such as Amazon.
 Acceptability – The growth strategy of a merger can be regarded as being acceptable
to both the companies as they both aim to obtain a competitive advantage over
Amazon (Butler 2020). In this regard, it may also be mentioned that the adoption of
this strategy will facilitate the efficient utilization of resources available to both the
companies.
 Feasibility – The strategy is highly feasible due to the availability of the adequate
resources required to implement the strategy in terms of finances and infrastructure.
Furthermore, the organizational cultures of both the companies are aligned and
inclined towards improving the performance of the employees through training and
development. Such training will help them to adapt to the new order of business
operations and functions in an efficient manner.
Conclusion
From the above discussion regarding the corporate growth strategy of a merger as
undertaken by the British retail and supermarket chain Sainsbury, to form an association with
another supermarket company Asda, it can be deduced that the primary objective behind such
a strategy is to enable the companies to increase their market shares. Furthermore, the
companies face high level of competition from their common rival Amazon, which is
regarded to be one of the global leaders in the retail industry. The growth strategy of a merger

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has been proposed by Sainsbury plc and Asda in order to collectively gain and maintain a
competitive advantage over their rival company, Amazon. The suitability, acceptability and
feasibility of the strategy has been determined using the SAF model and a careful evaluation
of the external and internal environment in which the company Sainsbury operates.

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