Managing International Trade: Challenges and Opportunities for Sainsbury's

This report discusses the challenges and opportunities faced by Sainsbury's in international trade. It provides an overview of the retail industry, background of the company, subsidiary company, and international trade. The report also highlights the challenges of global trade facing Sainsbury's and the opportunities in international trade. The subject is Managing International Trade and the course code is not mentioned. The college/university is not mentioned.

Managing
International Trade

Table of Contents
ABSTRACT.....................................................................................................................................3
INTRODUCTION ..........................................................................................................................4
MAIN BODY ..................................................................................................................................5
Overview of Retail Industry:.......................................................................................................5
Background of the company:......................................................................................................6
Subsidiary company:...................................................................................................................9
International trade:....................................................................................................................11
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................15

ABSTRACT
Investments made by most businesses in countries that have developing economies has
proven always to be very challenging. International business activities takes place in various
forms, movement of product from one nation to another, signing of agreements on contractual
basis that enables foreign businesses with franchising and licensing. Need of international trade
arises with increases in people's requirements as persons start liking cultures of different
countries then they also want to use things like them. This research report gives an overview of
evaluation and analysis of SAINSBURY's market share and level of development that can be
achieved in near future.
INTRODUCTION
Conditions of modern economy, development in technology, enhancement in transport
and methods of communication leads to encourage many organisations to expand their

operational activities and operate their functions in different countries, like their origin nation
and another nations as well. Each organisation became participant in international trade directly
and indirectly with their contribution in interchange of products and services within global
market (Alcamo, 2019). It setups a link among various economies and institutes. To be
successful in international market every business needs to first identify their targeted audience,
then focuses on the path through which they are able to reach their targeted marketed because
without knowing that whom business will going to serve, starting operations in other country can
cause in huge loss, downgrades its reputation and also reduces the chances that in future they can
operate their operations in that particular nation. SAINSBURY is the leading company in
business of retail, its origin country is basically United Kingdom but it also have running
business operation in 70 other countries as well. It has share in numerous sectors such as
Sainsbury's bank, Sainsbury's supermarket Ltd, home retail shops and convenience stores. In this
report, challenges and issues faced by SAINSBURY in implementing expansion strategy and in
setting the business are described.
MAIN BODY
Overview of Retail Industry:
It refers to the sector which concerns of all the businesses that sells products and services
to the customers. There are huge types of various stores in whole world which deals in retial
business like departmental stores, grocery stores, convenience stores,ec. Now retail sector
rapidly increases over a period of time and also effects the unemployement rate as due to
increase in retail business employment rate also increases as business hires huge numbers of
employees for their business. There are several strategies which retailer use in their businesses
such as for making effective decisions. Proper planning of strategies includes the selections of
different policies which major aim is to enhance the competitive position of the business
analysation of opportunities and threats in the industry, ON the other managerial decision al;so
plays an essential role in retail sector as it is majorly towards the implementation and analysis of
particular goals or targets. Strategies in retail sector is analysed only to make the vision and
offers guidance for the decision-makers, as well as provides a vision of how the mix of goods
and services will improve the satisfaction of consumer's (Bansal and Hunter, 2020). Effective
strategic process of planning establish a perfect strategic planners which helps in anlaysing the

whole enviroment, such as going trends in the market, various opportunities in challenging
market, enviroment of economy, market and political enviroment also. In every 4to5 years
strategies of retail sectors revised. Their ability for acheiveing the industry competitive costs of
transactions shows the margin of profit of retailers (Bonin and Perron, 2018).
There are various strategies which retail industry includes:
 Analysis of competition in market: It refers to the analysis of competition in the
market, oportunities for improvement and promotion of goods and services to survive in
competitive market. Effective analysis helps the business to find out where is business
not doing well, where is high chances of improvement and which trends the market
follows.
 Market Analysis: It refers to analysis of market which helps the specific sector(retail) to
analyse how effective your position of your business in the market. Conducting analysis
of marketing decreases the risk for business and helps in taking effectie decisions
regarding the buisness operations and activities.
 Analysis of Customer: It refers to customer analysis which helps the sector in
identifying the targeted customer's, wants and needs of the customers, and the goods and
services which satisfyies the needs of the customers, with the help of demographic and
behavioral profile industry easily analyse what products suits and satisfy the want of
customers as well as with the profile of customer industry can better understand the
potential and present customers (Carr and D’Odorico, 2020).
 Analysis of internal factors: It refers to analysis of internal business capabilities which
effects the overall industry that can be capabilities of technology, human resource,
capabilty of genrating economy scale, reputation, financial performance of business, all
these internal analysis helps the specific sector in effective decision making, development
of strategies which improves the operations and functions of the industry.
Background of the company:
SAINSBURY company set up by Mary Ann and John james in 1869. SAINSBURY is
well known as the UK's second largest retailer in the whole market industry, which deals in
around 450 stores with more than 25000 goods in the whole market with 15% of share in the
super market sector. Sainsbury business opens as a fresh food retailer store and later with the
time business expanded at a higher rate. SAINSBURY deals in various goods and services such

as electronic, toys, clothing, groceries, furniture etc. Company classified their business into three
main departments such as personal & beauty products, foods and refreshments and homecare
products inclusing this thay also offers various kinds of other services to their customers such as
consultancy services, insurance services. Company also operates their business through different
channels like from multi formate stores and through online. SAINSBURY earn high reputation
and goodwill in the overall market. Now compant also expanding their business in other
countries and their work which helps the business to maximize their profit. SAINSBURY
company doing very well in field of their products and services. In 2014 July, for generating
electricity company starts strengthing its one shop by modifying food waste into bio methane gas
and they becames the one of the retailer achieve the national grid by its own hard work
(Dunning, 2021).
IN 2009 SAINSBURY win an agreement of buying 24 shops from CO-orperative groups,
from 24 shops 22 shops are reserved for somerfield shops, but at a condition that groups were
needs to offer for taking care of somerfield and other remaining shops buy in 2009 by the co-
operative group. Under the deal with london organising committee of the olympic and
paralympic games sainsbury sells merchandise of paralympic and starts deals in events which are
high profile, and start sponsor various paralympic associations. These all small steps helps the
SAINSBURY to earn high profit and reputation in the market like in 2014 company achieve its
first victory by opening shop in Irvine which is the thousandth shop of SAINSBURY. In
november 2010, sainsbury opens refurbished lincolnshire shop and that is the second largest
supermarket of sainsbury. In supermarket most of the shops deals in same operations and layout
but their selling way to their customers may different along with that sainsbury also works in
operating fuel chain such as selling petrol, diesel, city diesel. SAINSBURY also expanding
portfolio of convenience with the help of jackson's store, bell's store. Sainsbury effectively runs
their business through online shopping with the help of online services customers select online
their product of groceries by phones and on online payment sainsbury also offers various
vouchers, cards of gifts, tokens of food to their customers (Erera, Nowak and Chelsea C III,
2018).
Challenges of Global Trade facing by SAINSBURY
There are several challenges are now days showing in intrernational trade over the
decades. In case of SAINSBURY business, if the business want to trade internationally, they

have to face many threats and challenges which can effect the overall whole business. There are
also high chances of that if they trade internationally they can loose their local customers which
adversely effects their business (Flood and Day, 2018).
There are several Challenges of International trade faced by SAINSBURY:
 Exchange of Currency: It refers to the business which have licensed that allows
that the value of currency in your country was not similar to the amount of
currency of different country, and similar as the currency value analogically worth
the similar amount of product and services. If SAINSBURY business wants to do
business internationally they can face many challenges related to the currency.
 Inflation Rate: It refers to a rate at which the common price level increase or
decrease in an economy overa a period of time. This is also a big challenge for
SAINSBURY as inflation rate change across the nations and can highly effects its
cost of labour, material cost as well as pricing of the goods and services.
 Language Issue: Language is still a big challenge for doing trade internationally,
if SAINSBURY want to do business internationally they should know and
understand other nations lanuguage. It is essential to considered their respected
spoken launguage because if they does not know their language they are not able
to connect with them there are various issus araises due to lack of effective
communication (Hansen, Panwar and Vlosky, 2019).
 Management of Global Team: Another difficulty of international business is
manage the employee who lives all over the nation. If SAINSBURY wants to do
business find diificulties in co-ordinating and connecting with teams it can be due
to various reasons such as difference in cultural, time zones, access of technology
etc. If they want to maintain effective working relation with international team
they need to conduct daily meeting, check-in that helps in business for
maintaining better relation with international business team.
Opportunities in International trade
 More employment: International trade generates more employment to serve or
fulfil the demand of foreign nation for nutritioning mutual understanding, peace
which help in lowering the fluctuation in trade, and helps the economy to get

stable. If SAINSBURY wants to deal in international trade that will increase the
employment opportunities in business.
 Increased Revenues: It refers to increase in the number of possible customer',
which opens the door of brand growth in other nation, more employment in the
business,If there are high number of customer's in Sainsbury international
business highlights that company earn good revenue in the market.
 Large-scale of production: It refers to the production of goods and services on a
high or large-scale. Due to large scale the production of goods and services
increases due to economies of scale.
 Exporting and Importing: Importing refers to puchasing of products and then
sell them in their own country. Exporting refers to selling their own products to
foreign clients. This is the most oldest and effective form of international trade. It
is the primary work when companies doing trade, when sainsbury business doing
international business they also enjoys the exporting and importing of goods with
other nation (Hedlund, 2019).
Subsidiary company:
A kind of company that controlled and owned by another company also referred to as
parent company. In the United Kingdom, the holding company holds a majority percentage in its
susdiaries. It has a control over more than 50% of the shares and major voting or decision
making rights in the susidiary company. Formation of subsidiary is not so tough, it establishes
when a big company acquired or buys other businesses and can also established with a new
beginning. Subsidiary company always have its separate legal entity from its parent company for
the ease in filling tax liability and effective regulations. It is not necessary that always parent
needs to be large, subsidiary can also be large but the relationship depends upon control,
ownership of shares and power of voting instead of number of individuals at the workplace of
organisation. It is also not necessary that location of parent and subsidiary must be same even
both can have their operations in different countries and can also operate their functions in
different sector (Hussein, 2018).
Pros of setting a subsidiary in other country:
Access to new markets for the goods or services: Establishment of a subsidiary
company in foreign country generates a separate legal entity in another nation. This power of

having legal entity help organisations in effective marketing of their commodities among the
local people. They are able in export or import of products. Moreover, in foreign countries there
are enormous opportunities available for growth or development and few middle economies that
are known lesser in the world can provide a great market.
More affordable options are available for production: In some markets, organisations
can find factors of production at lower cost. There are various overseas market presented in the
world that have a very high developed infrastructure for production process that enables
management in cutting the costs of material as well as reduces the whole cost of production
when manufacturing is done in high quantity. This can also increase revenue of business.
Access to technical skills: There are many countries who have very advance level of
technology and also a different way of critical thinking regarding technical issues that arises in
between the running of operations. Like, UK has a high level of knowledge in the field of
technology that attracts majoe foreign investments, through international trade (Keddell, 2018).
Cons of setting a foreign subsidiary:
Increase money and time in every activity: Establishing a subsidiary in other nation
can take a lot of time, this extra time taken by establishing procedure restrictes many companies
from taking this step further. Requirement of paid up capital if different according to the
countries economy and sector, but sometimes it can be competent.
Prohibitions on foreign ownership: In some countries, there are certain regulations on
few industries that prohibit the foreign ownership.
How to set up a subsidiary company:
There is a specific manner of establishing a subsidiary company which contains few steps in it
that are discussed below:
1. Provide Authorization: Authorization means the power of attorney, here it means the
existing enterprise and its management must be agreed to set up its subsidiary. As, establishing a
subsidiary is not a one time thing, its a long and continuous process which requires a lot of
efforts from each and every individual within workplace of parent company. Generally, decision
of forming subsidiary is taken through voting at the meeting of company's board of directors
with other managers also (Luo and Shang, 2019). This meeting must involves a good record of
all the votes, and seniors requires to draw a resolution regarding the whole paper works and other

documents as well. A agreement must be formed and that needs to be signed by the chair of
board with keepinga record of authorization.
2. Decisions based on the structure of business: There are two basic business structures
that are defined for subsidiaries as these both enables the holding enterprise in limiting the
liability of its subsidiary, the structures are corporate and limited liability corporation (LLC). The
management, after taking the board decision needs to collect and combine all circumtances for
deciding the structure of their subsidiary. One of the main factor that affects decision related to
structure is liability to pay tax as different entities have different potential for paying tax. In
deciding the structure, mostly factors are related to finance because it the main thing (Mann and
Götz, 2020).
3. Organize and for the enterprise: The management needs to follow the procedures of
their chosen territory to get the formation of their subsidiary done and running its operations
smoothly. It is easy to find the state's law and description regarding the documents required and
other legal frameworks on website of territory's company's law. All jurisdiction needs that the
owner of the enterprise must file the article of incorporation and details of selected structure on
which the organisation depends. Before filing these both the documents, owner requires to select
and also register the name and address of the subsidiary company. Once, owner gets all the
things required from the state secretary they can file and submit documents required for
formation with the fees.
4. Arranging financial resources: Any company whether it is subsidiary or enterprise
with new beginning needs capital for its formation for performing the business operations
smoothly. When a suchsidiary company is established it is easy for owner to arrange funds
because the holding enterprise can help its subsidiary and also directors can raise from
shareholders or through debt on the basis of parent organisation's goodwill. Assets transfer is
very common for eliminating a little amount. Directors can also issue shares on security and
exchange commission with krrping a clear record of all transfers of capital in the accounting
records of subsidiary company (McMaster and Pollard, 2021).
5. Organize all the business operations: Once the formation of sunsidiary is done, then
time comes for framing the norms regarding the functioning of operations. Drafting the laws
regarding recruitment, removal of directors and handling of duties with responsibilities and
accountability.

International trade:
It can be defined as commutation of capital goods and services across the globe for
fulfilling the customers needs or wants and to earn higher amount of revenue, it also helps in
maintaining a global presence of organisation. In most territories, these trades between various
economies represents a significant role in the gross domestic product of each country.
International trade has a existence in history as well, from then onwards economic, political and
social importance of trade among countries is continuously rising. Carrying the business
activities at international level is a difficult procedure when the comparison is from trade within
same country, but at the same time it also increases company's profit, goodwill and presence.
When the business activities occur between states of a nation elements such as government
policies, currency, economy, market and law influence the trade practices. For making the trade
in other territories and also for justifying international trade in this modern time various
international organisations were formed that also regulates the ethics and trade exercises, one of
the organisation is World Trade Organisation. The main aim of these organisations is to work
towards improving the condition and facilitation of international trade (Rhee, 2019).
A commodity that is shifted and sold from one person in a nation to a individual in
another nation is known as export of items from the nation of its origin, and an import is
explained as receiving that specific item. Exports and imports are accountable for current
account from the balance of payment within an economy. Global trade may provide customers
andnations the opportunities to explore the new kinds of things, products and culture as well.
Almost every type of commodity is available in international market and consumer can easily
find also due to internet facility whether it is about clothing, jewellery, stocks, food and spare
parts. Not even only goods, services can also be traded globally such as transportation, banking
and consulting. Enhancement in technology, industrialization, globalization and transportation
has a huge positive impact on the system of international trade. It is not so far and different from
domestic trade as it also includes behaviour of individuals or parties that involve in trade
activities, generally behaviour of various trade principles and aspects remains same whether it is
business across territories or not (Moran, Abramson and Moran, 2018). However, the major
difference between domestic and international trade is of cost incurred, international trade
definitely maximise revenue but demands high amount of expenditure as its initial cost. This
happens due to numerous cross border barriers on trade such as charge of explicit or implicit

tariffs, this cost can be measured but time taken by transfer process can not be measured. Along
with this, setting up business activities in other nation is tough in order to retaining the
operations because it is that a similar product is preffered by people of that nation, which have a
huge market share in country of its origin. The other factors that influence international trade are
difference in cultures, legal systems and safety of product (Strauch, Whittaker and Seppelt,
2019).

CONCLUSION
From the above report, it can be concluded, that setting the whole business activities in
country different from origin nation is very challenging because generally when any individual
established a business then they run business functions according to the aspects of that country
such as rules or regulations, government policies and customers. So, then again performing all
the paper work, taking permission and performing other necessary functions for starting business
activities become tough but at the same time if owner and management of organisation is able to
successfully established business in other country then they can enjoy various benefits of
international trade. International trade is also an extension in the manufacturing, interchange and
consumption and these three are fundamental elements of human life and economy of every
country. When SAINSABURY tries to start their operational activities in other countries than
UK, it faces various issues like language problem, for achieving success every business needs to
collaborate with local vendors and for these collaboration or establishing better communication
language become a major barrier. Another challenge faced by SAINSBURY is management of
teams globally, in initial phase it is difficult for top level of organisation to manage all the teams
from running business and from another, together but with the growing time and development
they are now successfully able to handle their all the teams with headquarter.

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