Corporate Strategy : Sainsbury and Asda
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Added on 2020-12-29
Corporate Strategy : Sainsbury and Asda
Added on 2020-12-29
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CORPORATE STRATEGY
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3External analysis of market environment....................................................................................3TASK 2............................................................................................................................................8Internal analysis of resources and competencies........................................................................8CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................12
INTRODUCTIONCorporate strategies are the plan, strategies and tactics developed by companies toachieve their corporate goals and to maintain their strategy. Corporate strategy is implementedby companies to achieve various advantages like tax saving, resources utilisation, competitiveadvantage, operational synergy etc. but it can also backfires the company as instead of benefits itcan create burden for the company which can lead to loss of employees and resources, customerdisloyalty etc. and therefore before applying any corporate strategy a company use techniqueslike Pestle, swot, vrio and porter's 5 force model to evaluate internal and external environmentand to see if implementing tactics would be profitable or not. To understand it better the reporthas taken case of Sainsbury and Asda. Sainsbury is the 3rd largest chain of supermarket deals infood, stationary, toiletries, beauty products etc. and Asda is subsidiary of Walmart and deals ingrocery market. Both the companies got merged in 2018 to prevail benefits from the deal andthis report will evaluate internal and external analysis of the deal and will evaluate its pro andcons. TASK 1External analysis of market environmentSainsbury 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 andcontinuously expanding its product ranges whereas Asda is subsidiary of Walmart that deals ingroceries and is merged with Sainsbury has Asda ans Sainsbury. they merged in 2018 to becamefirst retail supermarket of UK and combined with the deal of £51 billion. They got merged forthe various reason like to have competitive advantage over Tesco which is number 1 retailsupermarket of UK. The other reason was to have operational synergies which will help the company inattracting 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 orderto have more growth and profit. The deal was affected by various factors that were identified by the company with the helpof pestle analysis which includes political, legal, economical, social, technological andenvironmental 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 itlead to loss of potential customers, increased inflation in the nation, lead to political instabilityin the country and affected labour wages too which affected negatively to the deal of Asda andSainsbury (Michalakeas, 2015). In other words, by doing assessment, it has found thatgovernment action in relation to leaving EU may result into high inflation, pound devaluationand slow-moving economy. Hence, brexit will adversely impact consumer spending and therebysales as well as profitability of supermarket. Economic Factors External environmental analysis clearly exhibits that, due to brexit, value of pound sterlingdecreased in against to dollar. Hence, this in turn closely influences Sainsbury’s takeover ofAgro as it is facing issues in relation to currency hedging. Further, after recession slow growthfound in the wages of people (Swot and Pestle Analysis of Sainsbury, 2019). Thus, due to havingless disposable income households become price conscious. Referring such situation, severalretailers namely Aldi, Tesco, Sainsbury etc are offering products at heavy discounts which inturn reduces the level of profit margin. Social FactorsIn the recent times, shopping behaviour of British changed significantly as compared tobefore (Hamilton, 2018). Instead of doing big weekly shopping, now customers prefer to doshopping from local convenience stores and online mode. This in turn led downfall in the salesand profit of supermarkets including Sainsbury. Due to the incline in online shopping trend salesof 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 againstto declining sales trend around 2%, Sainsbury’s sales have increased by 6% . . Technological FactorsTechnological factors affect the business which includes number of factors that are newdiscoveries and development in technology in the nation or development of websites, socialnetworking 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 bytheir own websites. Sainsbury is always on top when its about technology advancement, it hasintroduced digital services like online food shopping and also click and collect service by whichcustomer with one click can avail products and services of the company. It impacted thecompany positively which has increased it sales by more than 80 % and has increased it ordersinstantly which helped Sainsbury to cope up with rapid changes in customer's behaviour aftermerger. Legal factors The legal factors includes laws and regulations, policies and procedures that governmentof UK implement on corporates related to tax, rights of labour, wage law, taxation and consumerregulations, export import policies etc. The legal factor that affected the company was change inpolicies of trade after Brexit and change in norms and regulations. Also the other factor affectedwas minimum wage law which stated that all labours need to be provided with fair and properwage 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 thatwill be introduced by UK government in order to reduce sugar content in drinks m and also newpolicies on banning advertising for high fat and sugar food for the children under 16 years of ageand will restrict marketing efforts of the company to attract children. This can turn out to be anopportunity for the company as it can find out substitute for sugar (Michalakeas, and et.al.,2015).Environmental FactorsThe environmental factors are the factors that affect the environment of economy whichincludes pollution, climatic conditions, global warming, recycling, disposal of waste etc. Theenvironmental factors that affect the company was recent ban on use of plastic and use of lesscarbon footprints by UK government which affected the working of the company. Theconsumers demand for supermarkets that has zero food waste but this is a task which Sainsburyhas 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 areopening in UK to attract customers and to enhance corporate social responsibility.PESTLE ANALYSIS
Political Government policies =TBrexit =Ttaxation policies =TTrade blocks = OEconomic Recession = T inflation =Tdepression =Tunemployment rates = Tinflation in food price =TEconomic stability =OTechnological technological advancement =O development of websites = O social networking = O online food shopping = O artificial intelligence = O virtual reality concept = O Legallaws and regulations = Texport import policies = Tminimum wage law = TEnvironmentalpollution = Tclimatic conditions = Tglobal warming = Trecent ban on use of plastic = Tuse of less carbon footprints = TPorter five force model Bargaining Power of buyers (High) It is quite high as Sainsbury even after its merger with Asda has biggest competitor that isTesco which offer similar products in low cost. As the government of UK is already concernedabout high prices on products of Sainsbury after the merger and exploitation of farmers so thiscan 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 canbe easily replaced and hence to improve its margin of profit it can buy products in low rates and
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