Corporate Strategy Report

This report analyzes the corporate strategy of Sainsbury's merger with Asda, examining the external market environment through PESTLE analysis and Porter's Five Forces model. It further delves into the internal analysis of resources and competencies using VRIO framework. The report evaluates the suitability, acceptability, and feasibility of the merger, highlighting its strengths, weaknesses, opportunities, and threats.

CORPORATE STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
External analysis of market environment....................................................................................3
TASK 2............................................................................................................................................8
Internal analysis of resources and competencies........................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Corporate strategies are the plan, strategies and tactics developed by companies to
achieve their corporate goals and to maintain their strategy. Corporate strategy is implemented
by companies to achieve various advantages like tax saving, resources utilisation, competitive
advantage, operational synergy etc. but it can also backfires the company as instead of benefits it
can create burden for the company which can lead to loss of employees and resources, customer
disloyalty etc. and therefore before applying any corporate strategy a company use techniques
like Pestle, swot, vrio and porter's 5 force model to evaluate internal and external environment
and to see if implementing tactics would be profitable or not. To understand it better the report
has taken case of Sainsbury and Asda. Sainsbury is the 3rd largest chain of supermarket deals in
food, stationary, toiletries, beauty products etc. and Asda is subsidiary of Walmart and deals in
grocery market. Both the companies got merged in 2018 to prevail benefits from the deal and
this report will evaluate internal and external analysis of the deal and will evaluate its pro and
cons.
TASK 1
External analysis of market environment
Sainsbury is the third largest supermarket retailer store of UK which deals food items,
toiletries , fashion, etc. and now even stared providing financial services to the consumers and
continuously expanding its product ranges whereas Asda is subsidiary of Walmart that deals in
groceries and is merged with Sainsbury has Asda ans Sainsbury. they merged in 2018 to became
first retail supermarket of UK and combined with the deal of £51 billion. They got merged for
the various reason like to have competitive advantage over Tesco which is number 1 retail
supermarket of UK.
The other reason was to have operational synergies which will help the company in
attracting more customers, and increase in production with low cost and utilization of resources.
This deal would give economies of scale and will decrease competition of the companies in order
to have more growth and profit.
The deal was affected by various factors that were identified by the company with the help
of pestle analysis which includes political, legal, economical, social, technological and
environmental factors which will help in evaluating pro and cons of the deal (Hamilton, 2018).
Pestle analysis of Sainsbury and Asda merger

Political factors
The political factor that affects the deal can be government policies, taxation changes,
Brexit etc. When Britain exit from UK it created a lot of chaos and problem for companies as it
lead to loss of potential customers, increased inflation in the nation, lead to political instability
in the country and affected labour wages too which affected negatively to the deal of Asda and
Sainsbury (Michalakeas, 2015). In other words, by doing assessment, it has found that
government action in relation to leaving EU may result into high inflation, pound devaluation
and slow-moving economy. Hence, brexit will adversely impact consumer spending and thereby
sales as well as profitability of supermarket.
Economic Factors
External environmental analysis clearly exhibits that, due to brexit, value of pound sterling
decreased in against to dollar. Hence, this in turn closely influences Sainsbury’s takeover of
Agro as it is facing issues in relation to currency hedging. Further, after recession slow growth
found in the wages of people (Swot and Pestle Analysis of Sainsbury, 2019). Thus, due to having
less disposable income households become price conscious. Referring such situation, several
retailers namely Aldi, Tesco, Sainsbury etc are offering products at heavy discounts which in
turn reduces the level of profit margin.
Social Factors
In the recent times, shopping behaviour of British changed significantly as compared to
before (Hamilton, 2018). Instead of doing big weekly shopping, now customers prefer to do
shopping from local convenience stores and online mode. This in turn led downfall in the sales
and profit of supermarkets including Sainsbury. Due to the incline in online shopping trend sales
of hyper and super market decreased to the significant level. However, in this situation,
Sainsbury has got advantage as it also offers retail products or services via online sites. In against
to declining sales trend around 2%, Sainsbury’s sales have increased by 6% .
.
Technological Factors
Technological factors affect the business which includes number of factors that are new
discoveries and development in technology in the nation or development of websites, social
networking and new composite market research etc. most of the companies are operating

business by using digital technology and selling their products through e-commerce sites and by
their own websites. Sainsbury is always on top when its about technology advancement, it has
introduced digital services like online food shopping and also click and collect service by which
customer with one click can avail products and services of the company. It impacted the
company positively which has increased it sales by more than 80 % and has increased it orders
instantly which helped Sainsbury to cope up with rapid changes in customer's behaviour after
merger.
Legal factors
The legal factors includes laws and regulations, policies and procedures that government
of UK implement on corporates related to tax, rights of labour, wage law, taxation and consumer
regulations, export import policies etc. The legal factor that affected the company was change in
policies of trade after Brexit and change in norms and regulations. Also the other factor affected
was minimum wage law which stated that all labours need to be provided with fair and proper
wage along with fixed working hours which negatively affected the company.
The future factor that can affect legal framework of the company can be sugar tax that
will be introduced by UK government in order to reduce sugar content in drinks m and also new
policies on banning advertising for high fat and sugar food for the children under 16 years of age
and will restrict marketing efforts of the company to attract children. This can turn out to be an
opportunity for the company as it can find out substitute for sugar (Michalakeas, and et.al.,
2015).
Environmental Factors
The environmental factors are the factors that affect the environment of economy which
includes pollution, climatic conditions, global warming, recycling, disposal of waste etc. The
environmental factors that affect the company was recent ban on use of plastic and use of less
carbon footprints by UK government which affected the working of the company. The
consumers demand for supermarkets that has zero food waste but this is a task which Sainsbury
has yet to achieve and it became one of the most important challenge for the company
(Kerikmäe, 2016).
The factor that can affect the company in future is that the zero waste supermarkets are
opening in UK to attract customers and to enhance corporate social responsibility.
PESTLE ANALYSIS

Political
 Government policies =T
 Brexit =T
 taxation policies =T
 Trade blocks = O
Economic
 Recession = T
 inflation =T
 depression =T
 unemployment rates = T
 inflation in food price =T
 Economic stability =O
Technological
 technological advancement =O
 development of websites = O
 social networking = O
 online food shopping = O
 artificial intelligence = O
 virtual reality concept = O
Legal
 laws and regulations = T
 export import policies = T
 minimum wage law = T
Environmental
 pollution = T
 climatic conditions = T
 global warming = T
 recent ban on use of plastic = T
 use of less carbon footprints = T
Porter five force model
Bargaining Power of buyers (High)
It is quite high as Sainsbury even after its merger with Asda has biggest competitor that is
Tesco which offer similar products in low cost. As the government of UK is already concerned
about high prices on products of Sainsbury after the merger and exploitation of farmers so this
can be a threat to the company and it can lose its customers.
Bargaining power of suppliers (Low)
Suppliers bargaining power is quite low as there are many suppliers in the market that can
be easily replaced and hence to improve its margin of profit it can buy products in low rates and

can sale them through technological advancement by developing their websites more efficiently ,
developing loyalty schemes and discounts which can work as an opportunity for the company.
Threat of entry (Low)
It is considered to be low as after merging Asda it has been 2nd largest supermarket of UK
which is already quite an establishment and new entrants cannot harm its position. The
technology factor which includes the trend for turning business online will work as an
opportunity for the company as Sainsbury is ahead in terms of technology and has introduced a
concept called one click service which helps it in retaining customers and also new technology
updates will work for the company in achieving growth.
Threat of substitute (High)
It is high as UK government is already imposing law on banning of sugar content in drinks,
therefore substitute can create a treat to the company. In case if other super market comes with
the new substitute of sugar in the drinks customer will switch to that store and this will affect
market share as well as production of the company and will lead to labour turnover in the
company.
Competitor rivalry (High)
Sainsbury even after merger faces intense competition with Tesco and Morrisons as they
too provide similar produce to the customers in low cost. It leads to cut throat competition and
price wars between all the stores. The labour of Sainsbury are quite skilled and also technology
and innovation is its specialisation which can turn into an opportunity for the company in which
it can adopt new VR technology that will allow customers to look at the product they wanna buy
while sitting at home (Gürel, 2017).
5 Forces for Sainsbury and Asda
Bargaining Power of buyers (High)
 Tesco which offer similar products in
low cost
 exploitation of farmers customers
Bargaining power of suppliers (Low)
 there are many suppliers in the market
 developing loyalty schemes
Threat of entry (Low)
 Lack of distribution channel
Threat of substitute (High)
 super market comes with the new

 High capital investment substitute of sugar in the drinks
customer will switch to that store
Competitor rivalry (High)
 Tesco Morrisons
TASK 2
Internal analysis of resources and competencies
Internal analysis of Resources
Financial resources
This resources deals with borrowing capacity of organisation from outside the company
as well as to have retained earnings that can be used to invest in new technology, merger deals
etc. The cash flow of Sainsbury is quite high and that is why it is considered to be 2 nd largest
retail supermarket. Even after closing down many stores in UK it still earns positive revenue by
offering more than 90,000 products in variety of product line to its customers which means that
they have enough financials to maintain their regular working capital requirements. Also, the
company pays fixed amount of dividend to its shareholders which again shows the stable
financial position of the company and which means financial resources works as an strength of
the company (Grayson, 2017).
Physical resources
This resource deals with premises of the company, raw material of the company, location
of the company as well as employees used by the company. The physical resources of the
company is its skilled labours which increases the working efficiency of the company. The
employees of the company stay highly motivated and are highly loyal towards the company
which gives it a competitive vantage over other companies.
Technological resources
The technological resources of the company are its strength. It includes apps like pay and
click which allow customers to get what they want at their foot steps in no time. The other
technological resource of the company can be use of VR technology which will allow customer

to have a look at what it wants by sitting at their home. The technology updation is the main
USB of the company and it is first to adopt technology and it might include use of advanced
artificial intelligence in the company which will make the operations more flexible.
Reputation
Reputation is the most important resource of any organisation as without good reputation
no firm can work in the market and no customer would like to buy a product from bad reputed
organisation. It includes reputation with customers, reputation with suppliers as well as providing
quality products to the customers. Sainsbury has good reputation in the markets and has
customer loyalty as it provides wide range of products to the customers in low cost with high
quality. It provides is customers with various loyalty schemes which gives benefit to the
customers and also provide them with discounts which retain its customers and maintain good
relation with them. It works as a strength of the company and helps it in increasing it sales.
Human resource
It deals with employees of the company and consists of their skills, level of
understanding their work, education and training, their experience and loyalty to the organisation
The company has highly skilled employees as well as have customers that are loyal to the
company which aids in to the human resource of the company. The company to retain their
employees conduct programmes and allow them with benefits and bonuses which maintains
good relation between them and the company and hence it works as a strength of the company.
Also, they provide customers with loyalty schemes and cards which includes discounts and
offers that help company in retaining their customers. (Apekey, and et.al., 2019).
Internal analysis of Resources
Resources Characteristics key indicators
Tangible resources
Financial resources This resources deals with
borrowing capacity of
organisation from outside the
company as well as to have
retained earnings that can be
used to invest in new
 Debt / equity ratio
 Operating cash flow

technology, merger deals etc.
Physical resources This resource deals with
premises of the company , raw
material of the company,
location of the company as
well as equipments used by the
company.
 market value of fixed
assets
 flexibility of fixed
assets
Intangibles resources
Technological resources It includes company's patents,
trademarks and other
technological advancements
that a company has used to
enhance its operations and
retain its customers.
 Intellectual property
 patent
Reputation Reputation is the most
important resource of any
organisation as without good
reputation no firm can work in
the market and no customer
would like to buy a product
from bad reputed organisation.
It includes reputation with
customers, reputation with
suppliers as well as providing
quality products to the
customers.
 Brand equity
 performance measure
Human resource It deals with employees of the
company and consists of their
skills, level of understanding
their work, education and
 Employee qualification
 employee turnover
rates

training, their experience and
loyalty to the organisation as
well as adaptability in the
organisation
Internal analysis of competencies
To understand competencies the Vrio analysis of Sainsbury is based on its strategy to use
resources which will give competitive advantage over its rivals in the industry and will help the
company in figure out its strength and weakness and areas to improve. Vrio analysis stands for
valuable, rare, imitate and organisational competence which are -
Valuable – The valuable resources of the firm are its finances as Asda is subsidiary of
Walmart which gives the companies a back support of finance and maintain its cash flow and
provide timely dividend to its shareholders which keeps them attracted to then company and also
the working capital requirements needed for daily operations are fulfilled by the company. The
other valuable resource of the company is technology as it is updated by the company on regular
basis and involves innovative techniques to attract customers and create online platforms and
apps to provide easy access to services for the company (Basu, 2017).
Rare – The rare resources of the company is its employees that are highly motivated,
have high morale and have high qualifications in education. The employees of the company are
highly trained and know ho to manage work and operations of the company. The employees are
provided with number of opportunities in the company and give chance them to grow and
develop their intellectual skills and also provide them with bonuses and benefits which decrease
company's labour turnover as well as increase employees loyalty with the company (Puranam,
2016).
Imitate – The resource that can be imitate by other companies are products that are
developed and provided to the customers by the company as the company provides basic
products with little innovation so the other company can easily imitate the products and can grab
high customer base. The differentiation in product is very less and hence offer homogeneous
product. Also, the UK government is planning to ban the sugar content in the drinks so this can
be an opportunity for Sainsbury to develop a substitute of sugar and can have competitive
advantage (Grinblatt, 2016).

Organisational Competence – Sainsbury to have competitive advantage can work on its
weakness that is physical resources. It needs to open and expand its stores in various locations to
have high market share and high customer base. The more the stores of Sainsbury would open
more then product will sale and increase the profit. The physical resource of the company is a big
weakness which needs to be addresses by also working on it equipments like machines which are
if outdated needs to be changed and updated.
Primary activities
The activities that involves physical creation of product and its sale after sale service. It
includes :
 Inbound logistics (Inputs to product)
Handling materials
Storing the stock
Distributing the goods all over the stores
 Operations
Use of machines
Packaging of production
Assembling the production
Controlling the quality
 Outbound logistics
Storage of products
Distribution of products
 Marketing and Sales
Advertisements
personal selling
 Service
 Installation of technology
Training of employees
Solving queries of customers
Support activities

It helps to improve effectiveness and efficiency of the primary activities.
 Infrastructure
Planning
Finance at all level of departments
Installation of technology
 HRM
Training of employees
Bonuses to employees
Development in technology
 Technology development
Research and development
Artificial intelligence
different apps and softwares
V Value : The valuable resources of the firm are its finances as Asda is
subsidiary of Walmart which gives the companies a back support of
finance and maintain its cash flow and provide timely dividend to its
shareholders which keeps them attracted to then company and also the

working capital requirements needed for daily operations are fulfilled
by the company
R Rarity : The rare resources of the company is its employees that are
highly motivated, have high morale and have high qualifications in
education. The employees of the company are highly trained and know
ho to manage work and operations of the company
I Imitate:The resource that can be imitate by other companies are
products that are developed and provided to the customers by the
company as the company provides basic products with little innovation
so the other company can easily imitate the products and can grab high
customer base.
O Organisational Competence:Sainsbury to have competitive advantage
can work on its weakness that is physical resources. It needs to open
and expand its stores in various locations to have high market share
and high customer base.
Activity Value Rare Imitate Organisational
Competence
back support of
finance and
maintain its cash
flow
✔ ✔ ✔ ✔
technology ✔ ✘ ✔ ✔
dividend to its
shareholders
✘ ✘ ✔ ✘
employees that
are highly
✔ ✔ ✘ ✔

motivated
highly trained ✘ ✔ ✘ ✔
Products and
services
✔ ✘ ✔ ✘
physical
resources.
✔ ✔ ✘ ✔
3. Evaluation of the case
Strength
 The strength of the deal was increasing
competition for the rivalries as both the
companies were in top 4 position of
UK's retail supermarket.
 The other strength of the deal can be
high technology advancements which
lead to innovation and creativity in the
product.
Weaknesses
 The weakness of the deal can be said as
intervention of the government for the
sake of safeguarding the rights of
farmers and customers.
Opportunities
 The opportunity of the deal can be
increasing in market share of the
company, and also tax saving and
operational synergy which can increase
sales of the company.
Threat
 The threat faced by the company can be
strict law and regulations imposed by
UK government, Brexit as many
potentials customers can get affected by
that and can reduce customer loyalty.
 Also, Tesco is the biggest competitor of
Sainsbury and hence id the biggest
threat for the company.
TOWS matrix

Strengths
 Strong brand
reputation
 Use of digital
technology that
includes pay per click
 Adequate financial
resources
 Economies of scale in
by synergy in
operations
Weaknesses
 Increase in
competition
 Customer's have wide
range of products to
choose from
 High employee
turnover
Opportunities
 Emergence of entry
in new market
 Increase in use
artificial intelligence
 Increase in market
share
 Use of various
technology is the
strength of the
company which will
help the company in
grabbing the
opportunity of use of
artificial intelligence.
 As the brand is already
recognised globally,
therefore entering into
new markets would be
easy for the company
which will increase its
sales and profit.
 Operational synergy of
both the companies
will lead to increase in
market share.

Threats
 Increasing in prices
of the suppliers
 Minimum wage
policy of the
government
 Decreasing carbon
footprints by the year
2020
 As the price of
suppliers are increasing
day by day it increases
the competition even
more.
 As the policies of
government are
straightening on
minimum wages and
also the labour
turnover of the
company is high.
 The price of products
offer by various
competitors are low
and hence customer
can switch very easily
and decreasing carbon
footprints can affect
the operations of the
company even more.
Suitability– The strategy chosen was horizontal merger by Sainsbury in merging Asda
and it created major changes for both the companies. The strength of the deal was increasing
competition for the rivalries as both the companies were in top 4 position of UK's retail
supermarket. The other strength of the deal can be high technology advancements which lead to
innovation and creativity in the product. The weakness of the deal can be said as intervention of
the government for the sake of safeguarding the rights of farmers and customers. The
opportunity of the deal can be increasing in market share of the company, and also tax saving
and operational synergy which can increase sales of the company. The threat faced by the
company can be strict law and regulations imposed by UK government, Brexit as many

potentials customers can get affected by that and can reduce customer loyalty. Also, Tesco is the
biggest competitor of Sainsbury and hence id the biggest threat for the company.
Acceptability – There are different types of stake holders that will be affected by the deal
which can be shareholders, customers and community and employees. All of these stake holders
get affected by the deal whether in a negative way or positive way. The deal of Sainsbury and
Asda affected the shareholders positively as the shareholders of the company was very much in
the favour of the merger as the share price of both the company together would have been
benefited the shareholders, Sainsbury was on the second position and Asda was on fourth
position which made it really obvious that the deal will increase share price and shareholders will
get benefit as well as can get bonus shares. The other stake holder was employees of both the
company which were not in the favour of the deal as merging both the companies will need less
employees and will need more skilled employees.
Feasibility –
In relation with developing the best practices for effective merger and acquisition on
which there are several resources that are to be considered. Merger is the process on which a
business has higher financial as well as operational support. Financial benefits have been driven
by an organisation for having effective funds for investment, limited cost to be implicated in
store set-up etc.

The report talked about merger of Asda and Sainsbury which was a big shock for UK
economy and the other rivalries as both the supermarket had position in top 4 retail supermarkets
of UK. The strategy used by Sainsbury to merge Asda was horizontal merger which refers to
merging two companies that operate in same field. This deal was created to have operational
synergies which led to economies of scale which increased the output and decreased the cost of
production.
The report concluded that how policies of UK government affected the merger and with the
help of Pestle analysis how the merger got affected by the changes in the economy wheatear
political, economical, social etc. With considering this factors the report analysed the impact of
strength and weakness they have on the company. It summed up the internal analyses by
analysing resources of the company by showing threat and opportunity that resource can create
and at lat used Vrio analysis for understanding internal competencies in managing resources of
the company.

REFERENCES
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Online
Merger of Sainsbury and Asda. 2019. [Online]. Available through :
<https://www.thegrocer.co.uk/sainsburys-asda-merger/sainsburys-and-asda-mega-merger-what-
we-know-and-what-it-means/566476.article>
Swot and Pestle Analysis of Sainsbury. 2019. [Online]. Available through :
<https://www.swotandpestle.com/j-sainsbury-plc/>