International Business and Global Operations of Sainsbury's: A Report

This report offers a comprehensive analysis of Sainsbury's global operations, examining its current market position and potential for international expansion. The report begins with an introduction to globalization and provides an overview of Sainsbury's current situation, including its market share and recent performance. It then delves into an external environmental analysis using PESTEL and Porter's Five Forces frameworks, assessing political, economic, social, and technological factors impacting the company. The report analyzes the impact of these factors on global operations, supply chains, and financial performance. Furthermore, it evaluates the identified opportunities and threats, highlighting key drivers of change and concludes with recommendations for future expansion strategies. The report covers the company's journey from a period of decline to its current status as a major player in the UK food retail market, emphasizing the influence of globalization and strategic initiatives on its success. The analysis incorporates data on exchange rates, share prices, and market trends to support its findings and recommendations.

Running head: OPERATIONS
International business and globalisation
Name of the student
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Table of Contents
Section 1..........................................................................................................................................4
Introduction to Globalization.......................................................................................................4
Current Situation of the Company...............................................................................................5
External Analysis of the Company..............................................................................................6
PESTEL Analysis........................................................................................................................6
Political factors:...........................................................................................................................6
Economic factors:........................................................................................................................7
Figure No 1: Graph showing exchange rate of GBP against USD and EUR..............................8
Figure No 2: Share prices graph of Sainsbury's on LSE.............................................................9
Social factors:..............................................................................................................................9
Technological factors:...................................................................................................................10
Porters 5 Forces.........................................................................................................................10
Analysis of the Impact...............................................................................................................12
Global Operations......................................................................................................................12
Supply Operations.....................................................................................................................13
Import for Internal Audit...........................................................................................................13
Financial Analysis.....................................................................................................................13
Section 2........................................................................................................................................14

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Evaluation of the Findings.........................................................................................................14
Opportunities and Threats..........................................................................................................14
Key Drives.................................................................................................................................14
Section 3........................................................................................................................................15
Conclusion and Recommendations............................................................................................15
References..................................................................................................................................18

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Section 1
Introduction to Globalization
Globalization has become an important part of the modern day economic growth of the
businesses. The 21st century has been a major time for the development of the business units into
a globalized brand. The globalization took place generally by the expansion of the marketplace
both locally as well as internationally. For the retailers that have a strong base in the domestic
sector, globalization has helped them to access new and potential customers and has also helped
them to use new capital useful for the global marketing process. The increase in the globalization
has helped the business to increase the success of the business in the most efficient manner.
Sainsbury has been one of the many companies that have extensively benefitted from the process
of globalization as because the company has been able to turn from a declined phase to a lively
brand which is ready to expand its business at each and every market. The company showed a
decline phase in the years in between 1992 and 1998. The initiation of globalization and the
implementation of major reforms within the company helped the enterprise to make a strong
turnaround and re-launch the brand in the year 1998-2003 followed by an aggressive marketing
and promotion to gain strong market share in the years in between 2004 to 2006. The
management of the business was able to make the remarkable turnaround just because of gaining
a strong positive impact from the policies and reforms initiated by them. The strong policies and
strategies like expansion, acquisition and also the innovative business solutions helped
Sainsbury’s to regain a strong market share in the market.

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Current Situation of the Company
The food retailing sector of UK is steadily growing and has occupied a major share in the
current scenario. A number of different large companies have been operating in UK in this
particular sector for quite a long time. Some of the prominent names among them include the
likes of, Tesco, ASDA, Sainsbury’s and many more as such. The major factors that the
management of these companies keeps in mind are the price and the quality of the food which
are quite important for the business. These factors help the company to ensure their own
competitive share in the market (sainsburys.co.uk 2020). Sainsbury’s is currently the third largest
food retailer of United Kingdom and operates more than 1415 different stores including more
than 950 supermarkets and 435 different convenience stores. The presence of the company in
various other markets is one of the major strengths of the business. However, the major revenue
of the business enterprise comes from the food retailing sector (sainsburys.co.uk 2020). With an
employee base of close to 190,000 employees and revenue of more than pound 28 million, the
company has a huge market base in United Kingdom. The globalization effect of the world has
had a certain impact in the strategies of the business enterprise. The strategy of the company is
based on ways to make a difference in the everyday lives of the customers.
Therefore the management of the business needs to ensure the success of the organization
in a proper and efficient manner. The management of the business has focus on international
expansion and thus has been taking steps to achieve so (sainsburys.co.uk 2020). On the other
hand, the business has also concentrated on the environmental impacts of the organization and is
busy in taking certain steps that can help them to reduce their effect on the globe. Some of the
prominent pledges of the company includes a pledge of pound 1billion for the achievement of

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net zero emissions within 2040 and also has plans to reduce the plastic packaging to almost half
within the next five years.
External Analysis of the Company
Sainsbury’s comes under the impacts of the macroeconomic factors in operation in both
in its home country namely, the United Kingdom and its host markets. Jin et al. (2019) mentions
in this respect that the business organisations like Sainsbury’s come under the influences of the
macroeconomic changes taking place in different spheres like economic conditions, political
factors and changes in customer preferences (sainsburys.co.uk 2020). The companies have to
align their market operational decisions with these changes in order to ensure they sustain in the
market. Zhang and Xu(2019) supports the argument to point out that failure to align decisions
with the market conditions like changing customer preferences results in the weakening in the
competitive positions of the companies. Thus, it is transpires from the analysis that Sainsbury’s
should take into account the macroeconomic factors in order to form its decisions to operate in
the market. The following are the macroeconomic factors which Sainsbury’s should take into
account while forming its international business decisions.
PESTEL Analysis
Political factors:
The political factors which the retail chain namely, Sainsbury’s has to consider consists
of the decisions taken by the government of its home country namely, the United Kingdom as
well as in the host countries. The company has to comply with the government policies in all
aspects of its operations. For example, the retail chain has to comply with the National
Minimum Wage rates formed by the Government of the United Kingdom (GOV.UK. 2020).
Sainsbury’s presently has to pay an hourly wage rate of £8.21 to employees aged 25 years and

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above. The retail chain has to pay a wage of £8.72 an hour to the employees from April 2020
onwards. Similarly, while employing human resources from the EU market, the company has to
pay the wages as per the prevailing minimum wages rates in the countries of origin of the
employees concerned (Ec.europa.eu. 2020). Similarly, while marketing goods in the United
Kingdom, the retail chain has to comply with the consumer protection laws in power in the
United Kingdom (GOV.UK. 2020). One of the most important political factors which the
management of Sainsbury’s should abide by would be Brexit. Brexit or exit of Britain from the
European Union is expected to deep impact on the industries of the country including the retail
industry. This is because the retail companies like Sainsbury’s are dependent on the supplies of
products from the EU nations. Brexit would result in increase in the expenses which the retail
chains would incur to acquire suppliers of products (BBC.com. 2019). Thus, one can point out
that the management of Sainsbury’s should take into account the increase in inventory
procurement expenses which it would have to bear owing to Brexit. Thus, it transpires from the
analysis that the management of Sainsbury’s would have to consider the political factors while
making the business decision policies for the retail chain.
Economic factors:
The management of Sainsbury’s should take into account that economic factors which
forming decisions. First of all, the management of Sainsbury’s should take into account the
exchange rates GBP against foreign currencies in the international currency exchange market.
This is because the retail chain requires acquiring products from the foreign markets like the EU
and has to convert the costs incurred into GBP, its home currency for accounting purpose. The
graph below shows that the exchange rate of GBP against EUR is stronger than USD

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(Bloomberg.com. 2020). This means that the retail chain should acquire more goods from the EU
market compared to the American market.
Figure No 1: Graph showing exchange rate of GBP against USD and EUR
(Source: Bloomberg.com. 2020)
The second economic factor which the management of Sainsbury’s should consider while
making decisions is the conditions of the capital market. The retail chain is listed on the LSE
which means that company directly comes under the influences of the share market conditions.
When the share market faces bullish trends, the company is able to generate high amount of
capital as investors invest more in the shares of the company. Sainsbury’s on the other hand
would be able to generate lower amount of capital when the share market experiences bearish
trends (Risman et al. 2017). This would impact the operations of the retail chain as it would be
able to generate less capital during prevalence of bearish trends. This, analysis shows that the

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management of Sainsbury’s should take into account the economic conditions while forming its
financing decisions.
Figure No 2: Share prices graph of Sainsbury's on LSE
(Source: Londonstockexchange.com. 2020)
Social factors:
Sainsbury’s come under the influences of the social factors to a great extent while
forming business decisions. The first social factor which the retail chain would require to
consider while forming decisions is changing preferences of customers. The present population
of the United Kingdom consists of a large population of people of foreign origin like Chinese
and Africans (Ons.gov.uk. 2020). This means that consumer base of Sainsbury’s today consists
of both consumers who are of British origin and foreign origin. The retail has as a result has to
market goods aligned to the tastes and preferences of these consumers. The second important
social factor which the management of the retail chain has to take into account while forming

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decisions is penetration of internet. The penetration of internet enables the consumers view and
shop the products marketed by the retail chain online. The consumers are also able to express
their feedbacks about their experiences they experienced upon consuming products marketed by
the retail chain (Istanbulluoglu 2017). This means that the management of Sainsbury’s should
take into account the expectations of the consumers while forming marketing strategies in order
to ensure high levels of customer satisfaction.
Technological factors:
The management of Sainsbury’s should take into account the technological factors while
making decisions pertaining to the business of the retail chain. This is because the retail chain is
heavily dependent on technology throughout the length and breadth of its operations. First of all,
the retail chain uses electronic payment portals to make and receive payments. Secondly, the
retail chain maintains continuous communication with its suppliers using emails and
teleconferencing (Balaji et al. 2018). Thirdly the retail chain markets products on the ecommerce
platforms. Thus, it can be established that the management of the retail chain should take into
account the technological factors prevailing the United Kingdom while forming the business
strategies.
Porters 5 Forces
Competitive Rivalry
 UK food retail market is highly competitive as there are companies like ASDA, Tesco
and many more as such. The competition is further getting increased with major food
retailers trying to enter the UK market

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 Sainsbury’s has a market share of 15.3% which was less by 1.8% and led to its reduction
from the market share of ASDA which is currently around 15.4%
 The high presence of the company through a large number of convenience stores is a
major strength for the organization in the UK market
Barriers for entry
 High barriers to the entry of major as well as small players in the market are due to a
large number of factors. The presence of highly sophisticated food retailing sector and the
significant development of major brands in the UK market has been the major cause for
this particular barrier
 The foreign firms in the food retailing sector of UK generally fail to replicate the local
culture and knowledge of the UK food retailing sector. The absence of proper knowledge
in UK culture has been a major threat for the substitute players to enter the UK market
Threat of Substitutes
 The threat of the substitutes in UK food retailing sector is much low because of the
mentality of the customers of the developed world
 Supermarkets can be major force in the business but the presence of large number of
supermarkets of the company provides them clear advantage in this case
Buyer Power
 Buyer power is high in the UK industry just because of the presence of a large number of
competitors that usually sells the same range of products
 The buyer power has tend to decrease a bit because of the global incession

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Supplier Power
 The supplier power can be best described as mutually dependent on the companies as
because the success of the companies has a direct impact on the success of the suppliers.
 The huge volume of sales involved with the Sainsbury’s, the supplier power becomes a
major player in the industry
Porters Diamond
The Porters Diamond Model constitutes of four major factors which includes;
a. Firm Strategy, Structure and Rivalry
b. Factor Conditions
c. Related and Supporting industries
d. Demand conditions
Analysis of the Impact
Global Operations
The internationalisation pattern of Sainsbury’s is not efficient. This can be established on
the several grounds. First of all, the retail market of the United Kingdom is extremely
competitive with presence of multinational retail chains. For example, the retail chains like
Marks & Spenser’s are based in the United Kingdom and enjoy strong international presence. In
fact, retail chains like M&S have succeeded in establishing their business strongly in the
emerging markets like India. This means that these competitor retail chains are far stronger
compared to Sainsbury’s which is still largely restricted to the United Kingdom
(sainsburys.co.uk 2020). Secondly, Sainsbury’s sources like procurements largely from the EU
markets. This means that the firm would have to bear higher procurement costs owing to loss of