Global Strategic Management: Analysis of Sainsbury's Existing Strategy and Recommendations for Changes
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This report analyzes Sainsbury's existing global strategy, its internal and external factors, and provides recommendations for changes using Ansoff Matrix. It includes PESTLE and SWOT analysis, and opportunities for market penetration, market development, and product development.
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TABLE OF CONTENTS INTRODUCTION...........................................................................................................................1 MAIN BODY..................................................................................................................................1 Existing strategy of the company.................................................................................................1 Explain the effects of the current internal and external factors have on it existing business......2 Apply either the VRIO or the ANSOFF Matrix to highlight some changes the company can apply to its existing strategy........................................................................................................5 Provide justifications to the changes you have made and explain if there are any pitfalls in the new strategic changes you have recommended...........................................................................8 CONCLUSION................................................................................................................................9 REFERENCES..............................................................................................................................10
INTRODUCTION Global strategy is a strategy made by the company for the expansion in the global marketplace. The main aim of developing global strategy is to increase the sales around the globe. Creating global strategy involves many factors for instance the products are according to global market place, analysing the competitors, production and other external and internal factors. Analysing these factors before expansion helps the companies to succeed in the global marketplace. Developing the global strategy is very important for the companies to ensure the business is succeeding in the global locations (Coccia, 2020).The companies want to expand into global market with time and experience to increase the market share and customer base. This strategy also helps in increasing brand awareness, generates new sales, helps to diversify the risks, lowers the labour cost, provides access to the new and it increases operational flexibility. Sainsbury Plc is a UK based supermarket chain based company. It was founded in 1869 by John James Sainsbury in London. The company is headquartered in London, England, United kingdom. The company is operating in UK and Ireland. TheSainsbury is dealing in retail segment that includes food, clothing, general merchandise, and financial services. it has around 23000 product offering and more than 1400 suppliers internationally and has over 1500 stores across UK. Sainsburyhas its own brands such as Argos, Habitat, Tu, Nectar and Sainsbury's bank. This report aims to examine the Sainsbury's existing strategy in the global market, and the current internal and external factors affecting the Sainsbury's existing business with help of different analysis, it also examines the companies opportunities to grow revenue through new products and the companies competitive advantage of its resources. This report also includes the suggestions and recommendations that company can use for the strategic changes. MAIN BODY Existing strategy of the company The business strategy refers to the set of actions, goals and plans about how business will compete in the market with the products. This helps company to achieve its objectives. The global strategy refers to the set of actions or plans that company develops to expand into the global market. The global strategy helps companies to enter in the new markets and expand the sales. The global expansion of the companies is beneficial for consumer as well as the company (Antokhov, and et. al., 2019). The global strategy helps companies to attract new customers, Sell 1
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more products and increasing market share in various countries. Thus the brand image and awarenessincreasesanditprovidesacompetitiveedgeagainstthecompetitorsinthe marketplace. The Sainsbury company is one of the leading retail company in the UK from more than 150 years of experience. Vision of Sainsbury: The vision of Sainsbury is to become the most trusted retailer where people love to work and shop. Mission of Sainsbury:The main goal of Sainsbury is to provide best food at best price. Values:Sainsbury is focusing on main 5 values those are; living healthier life, Making a positive difference in the society, sourcing with integrity, respect for environment and a great place to work (Crossan, Vera, and Pathak, 2021). Mainly the global strategies are divided into three types those are; Standardisation, International and Multinational. The Sainsbury's global strategy is as follows; The Sainsbury company is following multinational global business strategy. In this strategy the company catersproducts to differentmarket. The company is manly providing its services and products in England, Scotland, Northern Ireland and Ireland. But the company is importing the products from over 70 plus countries around the globe. And exporting in UK and Ireland. The Sainsbury is focusing onsmooth operations and reducing the cost, also the company is focusing to improve the food quality and providing different choices to the customer. The company is also focused to do innovations and provide values to the consumers consistently. Explain the effects of the current internal and external factors have on it existing business PESTLE Analysis PESTLE analysis is a tool to examine the different external factors effect on the business of a company, such as political, economical, social, technological, environmental and legal factors. This analysis helps companies to understand the dynamics of the market and growing the companiesbusinesscontinuously(Dzwigol,Dzwigol-BaroszandKwilinski,2020).These externalfactorsarenotcontrollablebythecompany.Theexternalfactorsaffectingthe Sainsbury's existing business are as below: Political Factors:It includes those factors which are influenced by the government of the country's. These includes tax rates, fiscal policies, trade tariffs, trade barriers, etc. the 2
most affecting political factor to the Sainsbury is the Brexit uncertainties. The Sainsbury is operating in the UK and the UK's exit from the European union can affect the business of the company. This is making difficulties for the company to import from the European countries. This could result in the price hike of the products. The another political factor affecting the company is the England's relation with Qatar. Any argue between the countries can lead to loss of the market share as the Sovereign wealth fund of Qatar is among largest shareholder. Economical Factor:This includes the performance determining factors of the economy such as inflation, unemployment, interest rates, economic growth, foreign exchange rates, etc. (Bahrami, and Khadivar, 2020) in case of Sainsbury the inflation is the most effecting factor as the Sainsbury's depends on the transport for its retail stores, any hike in the prices of fuel can lead to product price rising. Also the people working in UK have higher salary expectation this could also affect the business of UK. The company is also facing stiff competition from Tesco, Asda, and Morrisons. Social Factors:These factors includes the influence of the society on the business such as demographics, cultural trends, population analytics etc. The health consciousness among UK people is rising continuously the people are focusing on health diets this is important for the company to make changes according to the social trends. Also the fair trade movement is gaining popularity in the society the people are supporting farmer for the fair prices. Technological factor:These factors include influence from the technology such as research and development, innovation etc. the technological factors affecting Sainsbury's business are the technological analytics and online shopping of people. The technological advancementintheretailstoreslikeself-checkouttechnology,useofartificial intelligence and big data etc. and the online shopping habit of people in the UK is rising the people want to order groceries from sitting their home. Environmentalfactor:Thisincludestheinfluentialfactorsfromthesurrounding environment such as carbon footprint, pollution, waste, global warming, dealing with hazardous substantial etc. (Berman, and Dalzell-Payne,2018) in the case ofSainsbury the effecting environmental factor is carbon footprint and plastic waste. The carbon footprint of large supermarket chains are higher, weather it is transportation of goods or 3
keeping the goods in the storage, or in store at a minimum temperature it causes emission of carbon dioxide. The company is also facing issues with going green in the packaging of the goods it is increasing the cost for the company. Legal factors:These are those factors which are implemented by the law and legislations of the county. These can affect the operations of the business in the country. These factors include business laws, health and safety laws, labour laws, environmental laws etc. Sainsbury is affected by the recent rules of stop the promotion of high salt, sugar and fat foods for the children below sixteen. the company now has to approve its promotions from the regulatory authorities for launching in the market. Also the UK introduces the sugar tax in United Kingdom it willcostthe company to do modification in the products. SWOT Analysis Swot analysis is a tool to evaluate company's positioning and it helps to develop strategic planning. Swot analysis evaluates both the internal and external factors, also it asses the current and the future potentials for the company (Mazzarol and Reboud, 2020). The organizations use this analysis to improve its market position.Sainsbury's swot analysis can help company to focus on strengths and opportunities, it also can help to improve the weaknesses, and identify the potential threats. Sainsbury's SWOT analysis is discussed below; StrengthsOpportunities Strengths are the main aspect which gives the competitive advantage to the company; TheSainsbury is in the business from more than 150 years and it has extreme experienced leadership. Thee company is utilizing branding and advertisingveryeffectivelythough T.V. , online campaigns, print media etc. and it is also using very innovative promotion strategies. the company has over 1500 store across UK and a employee base of more than Opportunitiesreferstotheareaof improvement for expanding the businesses. Sainsburyhavetheopportunitiesto enterindifferentmarketsthough partnership and joint ventures. The use of new technology in the retail stores can be implemented such as self checkout mechanisms, this will help to reduce lines and boost the sales. The Sainsbury's has the opportunity to expand its market in other countries like 4
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1 lakh people.Africa, Asia. Sainsburyalsohasopportunitiesto expand in the local or rural areas of UK. As the demand of branded product is rising in the rural areas WeaknessesThreats Weakness refers to the areas in which the businessislackinganditneedsthe improvement(Yoshikuni,andDwivedi, 2022); The retail segment have low margins on the products in order to attract the consumers.Thissituationisnot sustainable forSainsbury. The increasing cost of the items and overall experience of the supermarket addstheadditionalcostforthe company. It has been difficult forSainsbury's to retain its customers as the consumers are switching brands frequently. Threats are the factors which impacts the business negatively; Therisingcompetitionintheretail segmentcanaffectthebusinessof Sainsbury,themaincompetitionof Sainsbury are ASDA, Tesco, Marks & Spencer etc. Changeingovernmentpoliciescan affecttheSainsbury'sfunctionality negatively(Macher,andVeledar, 2021). 5
Apply either the VRIO or the ANSOFF Matrix to highlight some changes the company can apply to its existing strategy. Ansoff matrix is a fundamental framework which helps marketers in identifying new opportunities for growing revenues of a business though development of new products or entering into new markets. It provides in identification of new combinations of markets and products. The matrix is two by two framework used by analysts to analyse and plan the growth strategy (Ameir, 2021). Different type of changes adopted bySainsbury is as below; Market Penetration:This is the concept of increasing the sales volume in the existing market through existing product. This is the least risky in the matrix. In this companies try to sell more to its existing market through different strategies for instance increased marketing for the product, price reductions, discounts, acquisition of competitors, and smooth distribution process (Otenko and Parkhomenko, 2019). The company can use price cutting strategy in order to attract new and existing customers. Sainsbury can increase promotions and advertising frequency in order to increase the sales in UK. The company also have to focus on loyal customers and offer them loyalty bonus to retain the 6 Illustration 1 : Ansoff matrix Model
customers. The Sainsbury can managed to increase the profit margins through these strategies. The Sainsbury can start using these strategyto reduce stiff competition from ASDA and Tesco. Market development:This strategy refers to focus on entering into new market with existing products. This is also considered as less risky for the business (Helmold, Terry, and Hummel, 2020). This does not involve research and development cost for new products. It benefits the business with new target market, this could be regional or international. Sainsbury can expand into new markets like its competitors using this strategy. This will help the company to increase the sales and it will raise the brand awareness among new customers. This strategy can help Sainsbury to expand into rural market of UK as the demand is high the company can increase its profit margins. Product development:This strategy focuses on developing new products for the existing market. When a business has its strong presence in the market and the target audience it looks for expansion of its market share through new product launches. In this the business have to invest inresearch and development process to develop new products. The business can also opt for branding a product produced by someone else. Also it can add new products into its product line by acquiring the rights of production and sell them. Sainsbury can introduce new products into the existing market of UK. Diversification:This strategy refers to entering a new market with new or fresh products. This growth strategy is most risky in terms of business risk. But in this both the strategy are required; product development and market development. The high risk can lead to high rewards for the business through new income opportunities or through opening new ways for market and products. The diversification furthercan be divided into 2 more different strategies; 1) Related diversification 2) Unrelated Diversification. Related diversificationis when business enters into the similar products of existing business.ItcostsconsiderablylessforthecompanytospendonR&D.Unrelated diversificationis when there are no synergies between the existing and new business product or market (Petrauskas and et. al., 2018). In case of Sainsbury's the company already has the diversified portfolio of more than the 23000 products. Also the company is operating in the new business of financial service market. The company can opt for new marketplace outside of united kingdom instead or new product development. 7
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From the above development strategies the Sainsbury company can opt for the the market development strategy. It would be less risky for the company in this the company has more chances of succeeding. The company can expand its market into Africa and Asia, as these continents are highly populated and there is high demand of the products also the company will get less labour cost. Provide justifications to the changes you have made and explain if there are any pitfalls in the new strategic changes you have recommended. There are few changes and recommendations that Sainsbury can apply on the business strategies. These changes will provide benefits and new opportunities of market and customer base expansion. The management of the Sainsbury can consider these changes in the business operations and strategies. Those are mentioned below; Expansion of business in new Markets :the company is operating in the UK only. The company can expand their market into regional category or into international countries like china, India where the population is high as well as the demand is also high (Rezaeian and et. al., 2019). The company can use market development strategy. But in this Sainsbury has to come up with different strategy as the consumers in the UK and Asian countries are different in income, value etc. the company has to spend on research and development for expansion. Developinginnovativemarketingcampaigns:Thecompanycandevelopnew innovative marketing campaigns for increasing the engagement or the consumers with the company. It will also help the company to face the competition and increasing the demands of the products. But this will increase the cost for the company. Opening stores in rural areas of UK:The company can open new stores in the rural areas of the UK. As the demand of the brands is rising in the rural areas the company can increase its revenue and profit margins. The company can also partner with local stores to reduce the setup cost of the stores. Adopting Market trends and changes:The market is dynamic and the perception of peoplechangeswithtimealsotheneedandwants.Themarkettrendsprovides opportunities to the companies the company can increase the demand of their products and services by understanding the need of the consumer or market trend. In this the 8
company has to invest on the research and analysts to get better knowledge of market trends. New technologies in the stores:The company is operating in online and offline both the ways. But the offline stores of Sainsbury feels outdated in comparison with competitors. The competitors such as Tesco and Asda are using new technologies, the Sainsbury should also implement new self checkout technology. This will reduce the time of the consumer and the labour cost will also be reduced for the company. These recommendation will help the company to fulfil the requirements of the consumer and it will provide new opportunities to the Sainsbury in the market (Yorks, Abel, and Rotatori, 2022). Thus these recommendations canhelp Sainsbury to attain growth and expansion or market and customer base. By adopting these the company can overcome the changes of the dynamic market. CONCLUSION From the above report this can be concluded that the global strategies are developed with the main aim of managing business at global level. global strategies helps companies by providing more opportunities and growth. For creating a business strategy the company has to analyse different factors of internal and external environment. It is important for the company to evaluate these factors in order to smoothly function the business. This allows companies to identify different challenges and difficulties in the existing environment. The company can not control the external factors but it can reduce the affect by using the different strategies. Also this can be concluded that company can use the market development strategy for the growth. This will allow company to enter into the new market outside UK and increase its customer base and sales volume. The company has the opportunity to expand into the international as well as the local market, also the company has the opportunity to implement new technologies in the stores. At last the company can adopt different changessuch as developing innovating marketing campaigns, tap into the rural areas of UK, and analysing the market trends it will help company to make its positioning stronger in the market. 9
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Yorks, L., Abel, A.L. and Rotatori, D., 2022. Strategic Learning for Sustainable Organization Performance.InStrategicHumanResourceDevelopmentinPractice(pp.93-114). Springer, Cham. Yoshikuni, A.C. and Dwivedi, R., 2022. The role of enterprise information systems strategies enabledstrategy-makingonorganizationalinnovativeness:aresourceorchestration perspective.Journal of Enterprise Information Management, (ahead-of-print). 11