Sainsbury's Expansion to France: PESTLE and Porter's Five Forces Analysis

This assignment involves analyzing Sainsbury's decision to expand its business operations from the UK to France. The report includes a PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis of the French market, as well as an examination of Porter's five forces model to assess the competitive landscape in the retail industry. The assignment aims to provide insights into Sainsbury's strategy for success in the new market and identify potential challenges it may face.

Report About Moving
Sainsbury's To France

Table of Contents
1. INTRODUCTION ......................................................................................................................1
2. BACKGROUND OF THE ORGANISATION...........................................................................1
3. DISCUSSION OF BUSINESS ENVIRONMENT......................................................................4
4. ANALYSIS OF THE BUSINESS...............................................................................................6
5. CONCLUSION............................................................................................................................8
REFERENCES..............................................................................................................................10

1. INTRODUCTION
Sainsbury's is the chain of supermarkets that are in United Kingdom. It is considered as
the 2nd largest chain with 16.9% share of the supermarket sector. The company was founded by
John James Sainsbury in 1869 and became the largest retailer of groceries in UK. Its stores have
been prosecuted on more than once occasion, for trading food past its use of date. The firm
originally sold only food, but now it sells DVDs, videos, books as well as clothing. It has
decided to move to France i.e. it is adapting entering into new market strategy. France is ranks as
the 18th largest economy in the world, and is also the part of the world's strongest economic area.
Since France is the UK's third major export partner and is the 3rd largest supplier, their
relationship is long established and robust. Apart from this, it has also discovered that France
never has shortage of labour and talent, that would be helpful for Sainsbury to expand its
business globally (Zahari, & Romli, 2018).
The objective of this report is to provide in-depth study of the company that is moving to
France, country's PESTLE and Porter's analysis that may affect Sainsbury globally and analysis
of business scenario.
2. BACKGROUND OF THE ORGANISATION
Sainsbury's is the public limited company that was established in 1869 by John James.
The organisation is the second largest chain in United Kingdom. The company became the
biggest retailer of groceries in 1922 and was the early adopter of self-service retailing in the UK.
It's vision is to be mostly trusted retailer, where workers desire and love to work and customers
love to shop. Its headquaters are in 33 Holborn, London, EC1, United Kingdom.
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The organisational structure of Sainsbury's is hierarchical as there exist a series of levels
of people and the level above controls each level. Each of its level is obliged for the level above.
For example, the responsibility of the line managers is with senior managers and line managers
are accountable for sales assistance. The company's structure provides employees greater
security in the work they undertake as their goals are well described to them. Therefore, whether
the company plans to launch a new product or enter into the new market altogether this will
enable workers to concentrate on their tasks.
Earlier the company used to sell only food products, but now it also trades cellphones,
books, clothing, videos, and DVDs. The firm is the oldest UK's biggest supermarket which is in
UK only. It has 800 convenience stores and 600 supermarkets (Steenkamp, 2017).
In the year 1995, Tesco took over the Sainsbury's to become the market leader and Asda
became the 2nd largest in 2003 which affected Sainsbury's and it came to third place. Later on,
when the firm regained it came to 2nd place in the competitors race. The company is currently
working in UK but looks at overseas for expansion. It has been discovered that, the organisation
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Illustration 1: Sainsbury's store, UK
(Source: Grandhi, K., 2016)

had a team of 6 people in china exploring the retail market, involving the property and regulatory
market.
Revenue (2018) Euro 28.456 billion
Operating income Euro 518 million
Net income Euro 309 million
Number of employees 186900
Business performance 2017-18 2016-17 Difference
Group sales £31,735 m £29, 112 m 9.00%
Profit before tax £589 m £581 m 1.40%
Basic earning per
share
20.4 p 21.8 p 6.40%
Full year dividend 10.2 p 10.2 p -
Return on capital
employed
8.40% 8.80% -
 The company's profit growth of £51 million driven by Argos synergies, delivered ahead
of schedule.
 Online groceries grew closely by 7% and convenience grew 4%.
 Moreover, maximisation of productivity of the supermarket space is done by the
company. Contribution of Agros stores in Sainsbury's and repurposing our food space in
a range of their stores is driving a rise in trading strength.
 Currently the company is making profit, since it has been reported that they have raised
their profits by 17% from last year. The firm has made £10 million over than they
anticipated with pre-tax profits of £610 million for the year 2017.
 As Sainsbury's are now serving a million more consumers that they did last year, it has
increased its revenue by 5% as it came up to £21.4 billion.
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 Apart from this, the company has opened 38 new supermarkets, which further, extended
to 100 stores (Payne & Frow, 2017).
3. DISCUSSION OF BUSINESS ENVIRONMENT
When a company thinks about retailing business in France, a thought that comes in mind
is about world renowned designers, high fashion, and exclusive trends. The French retailing
sector is more practical than that & is simply dominated by some of the world's largest grocery
retail chains, they lead the retail sector in entire sales in France.
There are natural resources, raw material and other features for which company has to
depend on nature. Also, the legal support of the authority for which the company has to rely on
government. These factors, including social and technological that exist externally are known as
business environment. Below is the PESTLE analysis of France:
 Political factors :- it has been discovered that, unfortunately since the starting, French did
not get wise leaders who could feel for them and bring the country on the right path of
development without any concern of going bankrupt. Apart from this, it has also been
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Illustration 2: PESTLE analysis

discovered that the ever widening gap between rich and poor led to French Revolution
where common people hanged the royalty in public. The key problem for Sainsbury's in
France is the price war that has been fundamentally apparent in current day grocery
retailers.
 Economic factors :- in France, the government continues to impose heavy taxes on people
and spend that revenue on state expenses such as development projects so that public
expenditure reached 56% GDP by 2010. It has been revealed that France has potential of
performing great as it has heavy industries to manufacture machinery, aircraft and auto-
mobiles. The country has chains of supermarkets all over the world and as far as
education is concern, it has the highest number of graduates. Moreover, France is the key
real Western Europe economy in which unemployment proceeds implacably to rise. This
can be a positive thing for the company as they would acquire more job seekers as
employees. GDP in 2018 is $2.794 trillion, per capita $43,600 in 2018, GDP growth 2%,
inflation increased by 2%, unemployment decreased by 9%, exchange rate 1.20%
(Nguyen, 2017).
 Social :- issues faced by France is of income and social class disparities and formation of
permanent underclass. This gave rise to crime rate and affecting the future potential.
Furthermore, another challenge is that around 80% of the population of the country is
Roman Catholic and they treat immigrants unfairly. As seen through the financial outlook
for France enhances, the nation's retailing industry is dependent on accomplishing direct
positive development over the gauge time frame. Sainsbury's along with this has to
maintain up with its market by supplying merchandises which are more socially accepted
in France market.
 Technological :- as most of the businesses are adopting digital technologies in France and
operating their business online, Sainsbury's also hasn't yet left this trend. The reason
behind the success of Sainsbury's in France is that the country is the leader in this
technology export. Therefore, this is an opportunity for Sainsbury's as the company can
introduce digital services like online food order and click and collect services where
consumers place their orders and receive shopping at their local supermarkets.
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 Legal :- the main law enforcement body is Police which involves CSR. The laws and
rules imposed by the government can have the direct impact on the performance of the
firm. For example, the law that established a new tax on advertisement highly precessed
and fatty foods. This is another opportunity for Sainsbury's to change its products
accordingly and also compile to the legislative requirements.
 Environmental :- it has been observed that different markets have variety of
environmental rules and standards which may affect Sainsbury's profitability in France.
Moreover, the greatest pressure has been seen on the companies working in France to act
in a socially responsible manner to hold the nature safe (Loo & Leung, 2018).
4. ANALYSIS OF THE BUSINESS
France, political factors like government policies and regulations of the retail industry
impact its revenue and profitability. The reason behind this is that, stability in the political
environment means better business as political disruption leads to disturbance in supply chain.
Therefore, this can be a threat to Sainsbury's as all these factors can make it tough for the
Supermarket retailing company to operate profitably in the international business environment.
An increased globalisation could present as both an opportunity and threat to Sainsbury's the
challenge in such that it would hold to compete against unknown factors and to happen the
beginnings of the marketing with economical and quality values. Economic factors are always
very crucial in the context of trade and business. The state of world economy decides the state of
trading and profits for the industry. As seen in earlier the Economy of France, GDP growth 2% is
there which needs to be concerned by the company. The increasing cost of fuels is the biggest
economic factors that might be impacting Sainsbury's in France. Moreover, the economic factors
of the country might impact the company immensely on the whole gross revenue of it as the
consumer would hold a lesser buying power therefore they would be more careful on their
disbursement. This is the threat to company, because if buyers start passing less, the net income
earned by the organisation will be less which will take to consequences like company's non being
able to spread out. Apart from this, rate of unemployment is little low then this will be a positive
thing for Sainsbury's.
Social trends of France are also major influencer on the retail sector and its profitability.
Changes in demographies and alteration in customer taste are going to have deep impact on
Sainsbury's. Moreover, when it comes to providing services to customers they desire for more
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personalised services. For this Company will have to alter the way they serve their customers and
develop their service experience more better to retain customers in new market with larger
market share. There are many other retailers similar to Sainsbury's in France which are in
competition. If customers feel unhappy with the services provided by one retail company they
shift their interest in another retailing brand. Therefore, Sainsbury can take advantage of this by
attracting more customers towards them, either by reducing its products prices as compared. to
competitors one or by improving the quality of its products (Islam and Mamun, 2017).
 Competitive rivalry (HIGH): In France, there are several competitive businesses exists
as Sainsbury so that competitive rivalry in the country is high. With this consideration, it
can be stated that the chosen business need to build sustainable differentiation. Therefore,
competition take with long term profitability in the chosen business. Collaborating with
competitors to increase market size to develop significant advantages. Furthermore, it can
be stated that high competition take place in retail industry which create impact on
overall goals and performances of the organisation. With this regard, effectiveness can be
generated in positive manner to focus on building scale.
 Bargaining power of buyers (HIGH): Buyers are demanding a lot so that in France,
Sainsbury face high bargaining power of customers. This is because, buyers have several
options through they can purchase products and services. In this consideration, it can be
stated that higher their ability seek increasing discount and offers. The chosen business
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Illustration 3: Porter's five forces model

can tackle this situation with consideration large base of customers. It assists in two ways
to reduce negativity and increase more opportunity at workplace. Therefore, firm can
streamline sales and production process in positive aspect. Rapidly innovative products
and services assists to focus on new products' expansion that offering to customers. All
the companies buy their row materials from suppliers. Suppliers have power to increase
or decrease the price of the product. Powerful suppliers use their power in negative way
and demanded for more price. Its overall impact on the profitability of the organisation
because more the suppliers demanded for the price more an organisation has to increase
price and it is not well for the company. Sainsbury's can remove the suppliers power to
build efficient supply chain with suppliers. They can also experiment with product design
with use of different material so that they can decrease the power of suppliers
(Gummesson, 2017).
 Threats Substitutes of product or services (High):- substitutes of product is the another
factor of the porter forces which affect the existing company in order to meet out the
company objectives and goals. Sainsbury's deals with the retail sector which affect the
long term goals in order to meet out the result outcomes. There are several substitutes in
retails ector that affect the cited company growth. Overall, it has been cleared that
Sainsbury's needs to make some new unique and productive product or services in order
to meet out the competitive market position. It affects the long term market. In order to
generate new making charges company needs to adopt new technology growth.
 Threat of new entry: New entrants always create threat for the organisation because it
is not clear that with which innovation they come in the market. New ways of doing thing
and it makes pressure on sainsbury's organisation. The new entrants pressure on the
Salisbury with low cost strategy, providing new value proportions. Sainsbury's can
tackle the new threats through innovating new products or service, building economy of
scale, building capacity and invest money on research and development. New entrants do
not like to enter in the market in which threat already makes existence (Datta, Ailawadi &
van Heerde, 2017).
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5. CONCLUSION
From the overall report it has been concluded that, Sainsbury's which is currently
operating in UK is moving to France for expansion of its business and to attain growth in the
new market. The reason behind this is that company is receiving not much response from its
present customers in UK. Another reason is that, the retail industry market in France is achieving
greater success and this will assist company to achieve higher growth. It also concluded that,
before expanding to France, company needs to consider the macro environment of France that
affect the retailing industry both in positive and negative way. Also, the internal factors that are
present their such as competitors, buyers, suppliers and threats to new entrance that are available
in the business environment that affect the business internally.
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REFERENCES
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equity align with sales-based brand equity and marketing-mix response?. Journal of
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Gummesson, E., 2017. From relationship marketing to total relationship marketing and beyond.
Journal of Services Marketing. 31(1). pp.16-19.
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Energy in the Light of PESTLE & SWOT Analyses for Island Countries. In Smart Energy
Grid Design for Island Countries (pp. 1-19). Springer, Cham.
Loo, P. T. & Leung, R., 2018. A service failure framework of hotels in Taiwan: Adaptation of
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Payne, A. & Frow, P., 2017. Relationship marketing: looking backwards towards the future.
Journal of Services Marketing. 31(1). pp.11-15.
Steenkamp, J. B., (2017). Global Marketing Mix Decisions: Global Integration, Not
Standardization. In Global Brand Strategy (pp. 75-109). Palgrave Macmillan, London.
Zahari, A. R. & Romli, F. I., (2018). Analysis of suborbital flight operation using PESTLE.
Journal of Atmospheric and Solar-Terrestrial Physics.
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