Strategic Management Analysis of Sainsbury's in the UK Retail Market

This report provides a comprehensive analysis of Sainsbury's strategic position within the UK retail market. It examines the external business environment through PESTLE analysis and Porter's Five Forces model, highlighting key factors influencing the company's operations. The report further delves into Sainsbury's internal environment through a value chain analysis, identifying strengths, weaknesses, opportunities, and threats (SWOT) to understand its competitive landscape. The analysis concludes with recommendations for strategic actions Sainsbury can take to enhance its market position and achieve sustainable growth.

sTRATEGIC MANAGEMENT
SAINSBURY

Table of Contents
INTRODUCTION................................................................................................................................2
2.0 UK EXTERNAL BUSINESS ENVIRONMENT OF THE SAINSBURY..................................................3
2.1 PESTEL ANALYSIS...............................................................................................................3
2.2 PORTER’S FIVE-FORCE MODEL APPLICATION....................................................................5
2.2.1 THREATS POSED BY NEW ENTRANTS.............................................................................5
3.0 INTERNAL ENVIRONMENT ANALYSIS.........................................................................................7
3.1 Value Chain Analysis..............................................................................................................7
3.1.1 Primary activities............................................................................................................7
3.1.2 Support offering activities..............................................................................................8
4.0 ANALYSIS OF THE SWOT POSITION..........................................................................................10
4.1 Strength...............................................................................................................................10
4.2 Weaknesses.........................................................................................................................10
4.3 Opportunities.......................................................................................................................11
4.4 Threats.................................................................................................................................11
5.0 MAIN ISSUES FACED BY ORGANIZATION.................................................................................12
6.0 ANALYSIS THE BUSINESS UNIT OF THE ORGANISATION WITH THE STRATEGY WHICH THE
ORGANIZATION CAN ADOPT.........................................................................................................13
Bowman strategy Clock.............................................................................................................13
7.0 CONCLUSION...........................................................................................................................15
8.0 RECOMMENDATIONS..............................................................................................................16
9.0 REFERENCES.............................................................................................................................18

INTRODUCTION
Sainsbury ranks third in the list of the largest supermarket chain in the UK. The aspects and
factors that majorly influence the working of the company is the external business environment
(Sivalingam, 2015). PESTLE analysis should be taken into consideration for the analysis of the
situations prevailing in the market which affects the Sainsbury functioning mostly. Porter’s Five-
Forces Model has also been applied in this report. Internal Environment analysis and SWOT
position have also been showcased in this report.

2.0 UK EXTERNAL BUSINESS ENVIRONMENT OF THE SAINSBURY
Sainsbury was established in 1869 and which is operating in 1106 and above supermarkets.
Sainsbury is providing food which is best for health. Sainsbury is also in a retail market which is
developing smart strategies and achieving its goals through gaining competitive advantages.
There are the external factors which have different situations and their impact on the
functioning and operation of the business. Sainsbury has also put many efforts for facing the
competition in the market. Sainsbury have guided value framework which affects the 20-20
business policy strategy with the help of the developing the strategies (Collins, et al. 2016).
2.1 PESTEL ANALYSIS
Political situation: The government of UK has imposed various policies for the reduction of the
corporation taxes. So, Sainsbury can save a lot of amount. Sainsbury is facing the situation of
lower profits as the stores sales slowed to .6 pc in the three months compared to the first
quarter of the year 2017. So it can be covered by amount left which is being utilized in paying
the large amount of taxes. Also the company is bearing the high wages cost which is also can
reduce by paying small amount of taxes due to imposing new tax policies by the government.
Also the Sainsbury can increase its sales by entering into new markets as European Union has
expanded which will includes the more European countries which give Sainsbury a chance to
enter newer markets. This all in keeping with the business strategy of the Sainsbury (Sainsbury,
2015).
Economic situation: The business strategy of the Sainsbury is also get affected by the foreign
exchange rates, changing interest rates, wide indicators of the economy like inflation, GDP, job
market, the stock market and unemployment. The strategy and policies of the Sainsbury are
also get affected by the rapid increment in the global crisis in food which has increased the food
prices and increases the purchasing cost for Sainsbury's (Hammad, 2015).
Social situation: The main challenge for the Sainsbury’s is meeting the set expectations of the
customers. The long-term vision of the Sainsbury making it a retail venture a viable cab be
strategized with the help of 20-20 plan (Sivalingam, 2015). For this, the company is engaged in
many CSR activities like support equal opportunity, charities and raising funds. The decision of

the Sainsbury’s for deploying the old age, single mothers, local talent etc., all these initiatives
helps the Sainsbury to create the social web around.
Technological situation: Enterprise resource planning (ERP), in the retail can be linked from the
warehouse of the headquarters to each store that will enable to share the information.
Through this transport and logistics can be linked to the supply chain that will help the
Sainsbury to execute the strategies as per the vision (Hammad, 2015). The recent and newest
technology that Sainsbury is using is focused on ease the queues which are inside the store.
Environmental situation: Sainsbury is engaging in the reduction of the retail store impact with
the help of conserving energy. In the northern part of the UK stores of the Sainsbury, it has
installed the CFL lights and has the solar energy to conserve the energy. The British farmers are
the suppliers who are facing the problem of pricing and volume due to the climatic changes. For
solving this problem, they are producing the cultivating the organic products (Sivalingam, 2015).
Legal situation: Sainsbury have to follow the labelling and packaging policies due to the strict
laws on the food and drinks which creates an additional burden on the company and will affect
the business strategy and policies. Sainsbury is engaged in the activities which are controlling
the quality and maintaining the food value and quality standards. It also follows health and
safety laws for its retail employees.

2.2 PORTER’S FIVE-FORCE MODEL APPLICATION
2.2.1 THREATS POSED BY NEW ENTRANTS
New entrants within the retail industry brings innovation, new ways and methods which put
pressure on the Sainsbury through reduce costs, lower pricing strategy, and providing new
unique value propositions to the customers. Sainsbury has to arrange and manage all these
issues and challenged and has to build effective and efficient barriers which will safeguard the
competitive edges. The retail supermarket of the UK is very big and having big opportunities
and chances for the new entrants to start their business and provides services which lead to a
big threat to the Sainsbury (Denrell and Powell, 2016).
2.2.2 BUYER STRENGTH
The power of the buyers is very high in the industry which is due to the presence of many rivals
and competitors which is selling the same products and engaged in providing the same services.
Also the switching cost for the consumers is very low which also create a threat to the
Sainsbury to lose his customers. This all put very pressure on the Sainsbury in the long run. The
more powerful and smaller customer base of the Sainsbury lead to the higher bargaining power
of the customers and also they seek increasing offers and discounts. The bargaining power of
the buyer is high as they have options to switch the brands if their needs are not satisfied
(Denrell and Powell, 2016). So Sainsbury should make strategies in such a way that will help in
gaining competitive advantages.
2.2.3 THREAT POSED BY SUBSTITUTE PRODUCTS
When a new service and product meets same kind of the needs of the customers in different
ways then the profitability of the industry suffers a lot. But the threat of the substitute is very
low in the retail industry because it id the necessity of the customers and Sainsbury always tries
to assimilate and converge new innovations in context with the food products for making the
extreme difficult to create the substitutes. The one threat of the substitute to the Sainsbury is
the lap up of other supermarket business. It also have a small fear of the local farmers.

2.2.4 COMPETITORS’ RIVALRY
Sainsbury is the largest clothing retailer and general merchandise in the UK which offers diverse
range of the products. Sainsbury operates in a competitive retail industry which can affect the
overall profitability of the market. The Sainsbury’s market position is very high and it is offering
various numbers of products which makes him in the number one position in terms of the
competition. Tesco, Morrison’s and Asda are the three large supermarket it the UK retail sector
which have their different competitive advantages over their competitors. Sainsbury has the
larger client range which helps it to gain the competitive advantages (Denrell and Powell, 2016).

3.0 INTERNAL ENVIRONMENT ANALYSIS
3.1 Value Chain Analysis
Value chain analysis is the group and chain of activities which Sainsbury’s is in particular service
which provides important services and products in the market. Sainsbury’s value chain analysis
has been done for finding the activity series which company performs.
Figure 1: Value chain analysis
(Source: https://research-methodology.net/starbucks-value-chain-analysis/)
3.1.1 Primary activities
Inbound logistics: Sainsbury does not focus on manufacturing the goods itself but it maintains
the strong relationships with the suppliers who offer and provides different types of
commodities to the form. Sainsbury relies on not facing the situation of the stock out. Finished
goods are stored in the warehouse of headquarter of the Sainsbury and distributes in their rest
of the stores of the company as per the requirements. Sainsbury focuses on the improved
inbound activities for providing better sustainability to the operational activities which will
provide sustainability to the operational actions (Preece and Shaw, 2018).

Operations: Sainsbury’s operations process is different from the other companies because it
does not carry its production process. Major operations are linked with the distribution of the
goods where products are carried by business enterprises. Sainsbury uses to outsource the
supply chain by the expert companies like Allport DHL, Unipart, CEVA logistics and Wincanton
logistics.
Outbound logistics: Sainsbury’s uses different delivery options for non-food items like click and
collect, standard delivery, Saturday delivery etc. Sainsbury has developed the established
network of the 20 centres of the distribution. Sainsbury has the largest number of the
warehouses in several areas which directly supports the company in proper management of the
commodities and goods which are sent according to the requirements received from the
physical stores (Busco, et al. 2014).
3.1.2 Support offering activities
Infrastructure: Sainsbury’s infrastructure plays a vital role in the company’s success which helps
in gaining the competitive advantages to the company. It includes different management layers,
quality monitoring and accounting departments. The company is engaged in providing quality
services to the customers thus it follows a system of the quality assurance. Each department
has their specific roles and duties which is performed by each employee in an effective manner.
Sainsbury has assigned a committee for the remuneration and appointments related affairs and
handling the financial affairs Sainsbury has also the risk assessment and internal audit
procedures (Christopher, 2016).
Human resource management: It is also the supportive function of the Sainsbury that aims at
the human resource management. There are 150,000+ employees in the Sainsbury who are
working at the international and national level. The company implements the recruitment
process with the help of the proper skill and job analysis. There is a different department in the
Sainsbury for the effective management of the human resource in the organisation and
ensuring the filling the vacant places as soon as possible.

Technology enhancement: The main and major important factor of the business to become a
market leader in the innovation. Sainsbury is engaged in using the improved technology in the
process of the job (Christopher, 2016). Sainsbury has also provided its products through online
media and Sainsbury is continuously developing and enhancing its product through
development and improvement of the technologies.

4.0 ANALYSIS OF THE SWOT POSITION
Figure 2: Swot analysis
4.1 Strength
Sainsbury has the good food performance which is focusing on the improvement of the margin
trends. Sainsbury is operating in more than 1400 supermarkets with the various numbers of the
stores. Sainsbury comes under the list of the largest supermarket in the country with the
supermarket share of 16.5% and above, and employ more than 150,000 numbers of employees.
The company has nearly 30,000 product lines in which approx. 20% are own –label. Sainsbury
also have an experienced team of the leaders. It also has excellent advertising and branding.
Sainsbury has the strong brand value with the good quality of the products. Its market share is
also high. So the company is the market leader in the retail industry of UK (Metzger, 2014).
4.2 Weaknesses
Sainsbury has negatively impacted due to the rise in the prices of the food which lead to sell its
products in the market at higher prices. There is a cut-throat competition in the market of the
Sainsbury in each segment of the retail. According to the report in the year 2017 the company
has faced the loss and its profit declined by the 0.6pc. Also the operations of the Sainsbury are
limited to only the market of UK. And its presence in the market is limited to UK only which
limits the scope of the business growth. Also it does not allow the investors to invest in the

organization (Metzger, 2014). There is also the technical problem faced by the company which
hinders the business performance.
4.3 Opportunities
There are many opportunities present for the Sainsbury in respect of expanding the presence in
the global markets especially in the emerging economies like India, Brazil, and China etc. which
has a wider market and large working population. These countries would provide large number
of labours at a low cost. Sainsbury can have its presence in the emerging companies through
partnerships or joint ventures for exploring the new markets. Self-checkout machines can also
be adopted by the Sainsbury for its new stores which would help in increasing the sales.
Moreover Sainsbury also have the opportunity in the field of the digital marketing which will
increase the online shopping facility in UK (Singhania, et al. 2014)
4.4 Threats
Sainsbury has the threat of the completion and new entrants of the business serving the same
services and products. There are large numbers of competitors of Sainsbury like ASDA, Tesco,
Morrison’s etc. which are providing the good quality of products at the discounted rate
(Singhania, et al. 2014). Increase in the prices of food all over the world also have impacted the
price of the Sainsbury which forces the Sainsbury to sell its product at the higher prices which is
increasing the threat to the organisation.

5.0 MAIN ISSUES FACED BY ORGANIZATION
Sainsbury is the largest supermarket in the UK and having great market share but instead of this
it faces many challenges, problems and issues. Following are the main issues which are faced by
the organization:
1. The main issue faced by the organization is increasing in the price of the food which forces
the Sainsbury to increase their selling price and sell the products at the higher rate due to
which competitors take the advantages and sell their products in the lesser price (Sivaraja, et al.
2017).
2. Sainsbury also faces the challenges in the initial days to maintain the standard of work which
is demanded by the sustainable agriculture in Britain for supporting the British farmers.
3. Sainsbury is also facing the economic uncertainty due to Brexit impact which lead to the
increase in the pricing and low sales.
4. There is a problem faced by the Sainsbury is the digital transformation which have to utilize
by the Sainsbury to sell its products through online media and connect its customers through
social media.
5. There is a deflation in food which cuts the sales value and the wages cots is rising in the
market. It also lead to the highest competition in the market.
6. Sainsbury sales is cutting down in recent times which lead to the lower profits and creating a
threat to the company.
7. Sainsbury is facing the issue of the employee turnover due to the lower wages paid to the
employees (Wrigley and Wood, 2017)

6.0 ANALYSIS THE BUSINESS UNIT OF THE ORGANISATION WITH THE
STRATEGY WHICH THE ORGANIZATION CAN ADOPT
The business unit of the Sainsbury can be analyzed by the Bowman Clock strategy and the
organization can adopt this strategy.
Bowman strategy Clock
Figure 3: Bowman strategy Clock
(Source: https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-strategy-
clock)
This strategy analyses the competitive position of the organization in the market in comparison
with other competitors. The first step includes the analysis of the competitors, assessing,
identifying and selecting the main competitors (Shields, et al. 2018). The further step includes
the development of the competitive marketing strategies that gain the competitive advantages.
There are the following options:
1. High price: As the Sainsbury is the old brand so the price of product is high and it focuses
more on the pricing then the focus on the customers. Sainsbury has a high product price so it is

a cost leadership and hence they have the high value products with high price of the products.
Sainsbury is offering the high quality products (Baker, 2014).
2. Differentiator: Sainsbury differentiates others with their main aim and objective of high
pricing being offered by the customers with the added value services provided.
a) Focused differentiation: Sainsbury can be said as the cost differentiator. The company has
the loyal customers and the brand image of the Company is good as compared to other
competitors. If Sainsbury has to gain its position back then Sainsbury should focus on the
developing its market in the international markets. Also it should focus on the customer service
like they should focus on the unique service and the product Sainsbury should focus on
developing retail service.
Sainsbury strategy is not focused on the customers but its focus is more on their products so
they always charge high prices for their products. Their main customers are those who prefer
the high-quality products and brands but its competitors focus on the differentiation by
controlling the prices (Tomczak, et al. 2018).

7.0 CONCLUSION
It can be concluded from the above report that the Sainsbury has the good market position
which is a leading in the retail supermarket. Along with this, the company is facing some threats
and influences which affects the Sainsbury in a negative manner. Through PESTLE analysis, it
can be said that Sainsbury’s External environment have proven to be beneficiary for the growth
of the Sainsbury. With the help of the Porters five forces model, it can be proved that
Sainsbury's competitive position is good but it should also make some effective strategies for
gaining more competitive advantages. Moreover, Sainsbury's internal environment has also
influenced it working.

8.0 RECOMMENDATIONS
The first thing in which Sainsbury should focus on is in their policy of pricing which will help in
achieving the position of cost leadership among all the retailers. If we look out on the external
factors then it should focus on the forces like rising costs of raw materials and recession.
Sainsbury should follow the approach of process driven. Sainsbury’s need to pay attention on
the effects of environment and should prepare the reactive strategy. Sainsbury can provides the
100% food supplies in the retailing which will enhance the image in the market the help of
direct interaction with the consumers and through promotional campaigns. Sainsbury can also
start its operations through the advanced technologies. Sainsbury should expand and diversify
in the emerging economies like Asian countries. Sainsbury should focus on more marketing
activities so that it can raise its sales and makes more profits (Graham, 2018). Sainsbury should
recruit talented and capable staff for the smooth operations and functioning of the staff.
Sainsbury should pay attention on increasing the customer value by various methods and
strategies. Sainsbury should focus on overcoming the threats and grab the opportunities for the
further developments and expansions. Sainsbury should also kept eye on the activities of its
competitors so that it can implement strategies to compete with the competitive environment.

9.0 REFERENCES
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