Analysis of Current Strategic Position of Sainsbury's Supermarkets

This report analyzes the internal and external environment of Sainsbury's supermarkets, including PESTEL and SWOT analysis, strategic capabilities, Porter's Five Forces, and strategic group framework. It concludes that Sainsbury's has a competitive advantage over its competitors due to its quality products offered at low prices, but faces threats from major competitors Tesco and Asda.

RUNNING HEAD: Strategic Management
Strategic Management

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Contents
Introduction......................................................................................................................................2
Current Strategic Position................................................................................................................2
PESTEL Analysis........................................................................................................................2
SWOT Analysis...........................................................................................................................4
Strategic Capabilities...................................................................................................................5
Porter’s Five Forces.....................................................................................................................6
Strategic Group Framework.........................................................................................................7
Evaluation and Conclusion..............................................................................................................7
References........................................................................................................................................9

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Introduction
Sainsbury’s supermarkets are named as one of the largest supermarkets in the United Kingdom
ad was established in the year 1869. The supermarket is engaged in selling a wide range of
quality grocery and food products along with other offers and services such as meat, bakery, fish
counters and non- food products such as homeware and clothing, coffee shops, pharmacies,
petrol stations and restaurants. Its vision is to become the most trusted retailer where people love
to shop and work. They put their customers at the heart of their business (Sainsbury’s, 2018).
This report focuses on the analysis of the current strategic position (internal and external
analysis) of Sainsbury’s along with discussing its implications to strategy formulation in the
organization.
Current Strategic Position
The term strategic positioning can be defined as the positioning of the company or an
organization while considering the systematic realization of that positioning and the dynamic
nature of the environment (Rothaermel, 2015). The current strategic position of Sainsbury’s has
been analyzed with the help of conducting its internal and external analysis.
PESTEL Analysis
Political- the performance of Sainsbury’s is affected by the political factors of United Kingdom.
Tax- The British government has reduced the corporate tax rate to 19% which is in the benefit of
big companies like Sainsbury’s which, in turn, will allow them to save significant sums of
money (Government UK, 2018). This appears to be a big opportunity for Sainsbury’s.
Licenses- The British Government is providing licenses for the establishment of the business to a
number of competitors thereby resulting in a threat for Sainsbury’s.
Economic-
Disposable household income- The supermarkets of UK are expected to have a positive impact
due to the increase in the disposable household income of the people in the year 2017 by 2.3%.
This is expected to increase the sales of Sainsbury’s as well.

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Inflation Rate- The inflation rate has reached 1.4% which is expected to bring an increase in the
prices offered by Sainsbury’s. UK is highly dependent upon imported food products and the food
imports are impacted by the plunge in value. The increased cost of imports is expected to result
in increased cost for the ultimate customer (Lim, Antony & Arshed, 2016).
Social-
Social Trends- The changes in social trends can affect the demand of products. These days,
people emphasize the use of fresh products and easy style cooking. This can be considered as an
opportunity for Sainsbury’s to encourage unfussy eating and new recipes.
Healthy Choices- Many people are shifting towards healthy food due to increasing level of
obesity faced by them. This trend appears to be a beneficial opportunity for Sainsbury’s to keep
more healthy food in stock at lower prices than its competitors (Barney & Hesterly, 2010).
Technological-
Saving Energy Costs through Technology- The emerging technologies have made it possible to
produce quality products with lowest possible costs. Sainsbury’s is making huge amount of
investments for the purpose of saving energy costs and reducing the overall carbon emission rate
in UK.
Electricity Generation through Technology- Sainsbury’s can use developed technology as an
opportunity by using waste for the generation of electricity instead of making the use of other
sources for the purpose of saving the electricity costs.
Environmental-
Pressure from the Government- The organizations are increasingly being pressurized for acting
in a socially responsible manner in order to safeguard the environment and to abide by the
requirements of Environmental Protection Act, 1990. There is both direct and indirect impact of
the activities of the organizations on the environment.
Pressure from the Competitors- The competitors are also acting in a socially responsible manner
and are ensuring that there activities does not have a bad impact on the environment. Similarly,
an initiative has been taken by Sainsbury’s by adopting the ‘Reduce, Reuse, Recycle’ approach

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with the view to manage packaging, waste and recycling. They are also taking steps for the
purpose of reducing their operation carbon footprints (Engert, Rauter & Baumgartner, 2016).
Legal-
Stricter laws- the policies and legislation of government directly impacts an organization’s
performance. For example, the tax on advertising of fatty and highly processed foods reduces the
profitability of Sainsbury’s.
Financial Burden- The laws on food and drinks binds Sainsbury’s to strictly adopt packaging and
labelling policies thereby resulting in a financial burden on the company.
SWOT Analysis
The SWOT analysis of Sainsbury’s highlights the following strengths, weaknesses, opportunities
and threats.
Strengths
Sainsbury’s have been able to create a strong presence across UK which has also expanded its
customer base over a period of time leading to greater amount of profits. It is now one of the
largest supermarkets of UK. It has been able to create a good reputation in the minds of its
customers due to the quality products and services offered by it. These are strengths which act as
the plus point for the organization (Heasman & Lang, 2015).
Weaknesses
The weakness of Sainsbury’s lies in the strategy adopted by it for management. The management
strategy requires greater focus and it is recommended to offer better customer service to the
customers. Market researches are also not conducted from time to time due to which outdated
products are offered by the supermarkets. The increase in the number competitors is not taken
into consideration while adopting the strategies. The improper implementation of the loyalty
schemes also resulted in lack of benefits for the organization (Lasserre, 2017).
Opportunities

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During Christmas and festivals, the customer base of the supermarket increase at a rapid pace
resulting in larger profits. Sainsbury’s is already on the list of top supermarkets of UK and is a
major threat for other competitors. It also has a number of opportunities to in terms of financial
services and online marketing (Goetsch & Davis, 2014).
Threats
Sainsbury’s faces the biggest threat from its major competitors such as Tesco and Asda. The
success of Sainsbury’s is also affected by its high prices in comparison with its competitors. The
strategies adopted by the competitors for building long-term relationships with the customers is
also a threat for the business as it may drive away its customers.
Strategic Capabilities
Strategic capabilities refer to the resources and competencies possessed by Sainsbury’s which are
required for the purpose of its survival and prosperity.
Resources Capabilities
Threshold Capabilities The stores of Sainsbury’s are
situated at prime location.
Also, all the products required
by the customers are available
under a single roof.
Sainsbury’s also has sufficient
financial capital for meeting
its requirements. Also, the
employees working in
Sainsbury’s have skills and
knowledge which are required
for the effective functioning of
the organization.
The stores are attractive from
the outside and inside which
assists in grabbing the
attention of the customers.
Also, the human resources of
the organization have the soft
spoken skills which allows
them to maintain friendly
relations with the customers.
Capabilities for Competitive
Advantage
With the passage of time,
Sainsbury’s has become an
established brand which
The brand has been capable of
maintaining its loyalty
towards the customers which

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provides it a competitive
advantage over others.
provides it a competitive
advantage over others.
There is a big difference between the threshold resources and capabilities and unique resources
and capabilities of Sainsbury’s. The threshold resources and capabilities of Sainsbury’s allows it
to meet the basic requirements of the customers in the marketplace. These are the basic facilities
which are required to be available with Sainsbury’s for surviving in the market for a longer
period of time. On the other hand, its unique resources and capabilities allows it to become a
market leader through its loyal practices towards the customers and its established brand image.
This, in turn, provides it a competitive advantage which is difficult to b imitated by others in the
market (Pearson, 2007).
Porter’s Five Forces
Bargaining power of the suppliers- the industry is affected by the suppliers through their ability
of raising the prices or reducing the quality of products and services. The suppliers are inclined
towards big grocery and food retailers and fear losing their contracts with major supermarkets.
Hence, the retailers such as Asda, Tesco and Sainsbury’s have strengthened their positions so
that they can get the lowest possible prices from the suppliers (Bettis, Ethiraj, Gambardella,
Helfat & Mitchell, 2016).
The Intensity of Competitive Rivalry- there is high intensity of competitive rivalry in the grocery
and retail industry. Intense competition is faced from the competitors by Sainsbury’s in terms of
products, price and promotions. Sainsbury need to come out with innovative ideas for dealing
with the competitive pressure.
The Bargaining Power of the Buyers- Buyers have the ability of affecting the industry with their
ability of forcing down the prices and bargaining for greater quality of services. The products
with low prices are easily able to attract the customers. The option of online retail shopping
facilitates easy comparison of the prices of products. Therefore, high bargaining power of the
customers is a threat for Sainsbury’s and to the industry (Wheelen, Hunger, Hoffman &
Bamford, 2017).

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The Threat of Entry of New Competitors- New capacity is brought in the industry by new
competitors as they have the desire to gain a share in the market. Entry threat is dependent on the
entry barriers and the expected reaction from already established competitors. In the food retail
industry, there is low threat of new entrants as huge capital investment is required for
establishing brand name and becoming competitive. The major brands such as Tesco and
Sainsbury have obtained the substantive portion of the market and it is difficult for the new
entrants to establish market value.
The Threat of Substitute Products- There are low number of substitutes in the food retail industry
as it is regarded as the necessity by the consumers of UK (Hill, Jones & Schilling, 2014). New
innovations are assimilating in the retail market with respect to the alternative businesses and
food products for the purpose of making the shopping experience of the consumers more
pleasurable. The internal industry threat is the only major threat of substitute whereby the
business of supermarkets can be put aside by other supermarkets.
Strategic Group Framework
Strategic group analysis provides the differences in the competitive strategies adopted by the
competitors by the firms in the same industry. This method is useful for the purpose of analyzing
the market and understanding the strategic competition. The most attractive spaces within the
industry can be used for identifying the opportunities and the mobility barriers for moving
towards various spaces within the framework.
The main source of the success of Tesco is the cost leadership strategy and customer oriented
strategy adopted by it. The strategies also include providing the best experience to the customers
by offering lowest prices along with bringing value and simplicity to the complicated market. On
the other hand, Asda’s main focus is on ‘everyday low price strategy’ along with concentrating
on the high profitability instead of the trust of consumers (Barrick, Thurgood, Smith &
Courtright, 2015).
Evaluation and Conclusion
The analysis of the internal and external environment of Sainsbury’s provides it has a
competitive advantage over the competitors due to the quality products offered by it at low
prices. There is an overall stability in the internal and external environment. The major threat is

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only from its main competitors i.e. Tesco and Asda. Sainsbury’s is also adopting certain
environmental friendly strategies which provide it a competitive advantage over others.
Therefore, it can be concluded that the uniqueness of the organization is capable of defeating its
competitors in the present and in future. This report highlighted the strengths, weaknesses,
opportunities and threats of Sainsbury’s which must be kept in mind while the formulation of
strategies. Along with it, it must also consider other environmental factors in order to deal with
the competition.

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References
Barney, J.B. and Hesterly, W.S., 2010. Strategic management and competitive advantage:
Concepts. Englewood Cliffs, NJ: Prentice hall.
Barrick, M.R., Thurgood, G.R., Smith, T.A. and Courtright, S.H., 2015. Collective
organizational engagement: Linking motivational antecedents, strategic implementation, and
firm performance. Academy of Management journal, 58(1), pp.111-135.
Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating repeatable
cumulative knowledge in strategic management. Strategic Management Journal, 37(2), pp.257-
261.
Engert, S., Rauter, R. and Baumgartner, R.J., 2016. Exploring the integration of corporate
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Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper
Saddle River, NJ: pearson.
Government UK. 2018. Rates and allowances: Corporation Tax, [Online] Available at:
https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-
allowances-corporation-tax
Heasman, M. and Lang, T., 2015. Food wars: the global battle for mouths, minds and markets.
Routledge.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated
approach. Cengage Learning.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Lim, S.A.H., Antony, J. and Arshed, N., 2016. A Critical Assessment on SPC Implementation in
the UK Food Industry. Journal of Systemics, 14(1), pp.37-42.

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Pearson. 2007. Strategic Capability, [Online] Available at:
https://catalogue.pearsoned.co.uk/assets/hip/images/catalog/uploads/ECS8_C03.pdf
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us/our-vision
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management
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