Strategic Management: Porter's Five Forces and Value Chain Model Analysis of Sainsbury

This report on Strategic Management analyzes Porter's Five Forces and Value Chain Model of Sainsbury, the second largest supermarket in the UK. It discusses the impact of competitive forces on the profitability of the company and provides recommendations for growth and success. The report also covers primary and secondary activities of the value chain model, including inbound logistics, operations, outbound logistics, marketing and sales, services, human resources management, firm infrastructure, technological development, and procurement.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Porter's Five Forces model.........................................................................................................1
Porters value chain model ..........................................................................................................3
Recommendations-......................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic Management is defined as the management of company resources in order to
achieve their desired goals and objectives. Their main aim is to gain competitive advantages
through which the employees of the organization acts appropriately to survive in the changing
external environment(Sedevich-Fons, L., 2018). It helps to provide various directions to
workforce by development of diversified plans and policies that are framed to accomplish
different goals and assigning the resources in systematic manner to implement the policies
effectively. In order to describe various aspects within this report, Sainsbury will be chosen
which is the second largest unit of supermarkets headquartered in London, UK.
This report will illustrate the concepts with the help of M.E. Porter’s value chain model,
Porter's five forces model along with its impacts over the organization's success and failure.
Apart from this, the study will also highlight certain recommendations for the growth and
success of the organization.
MAIN BODY
Porter's Five Forces model
In order to analyse the competitive strength and profitability level of Sainsbury, Porter's Five
Forces model is used to understand forces influencing the profitability and create strategies in
order to take competitive advantage and increase the profitability of the company.
Threats of new entrants into an industry
New entrance in retail industry brings innovation and new ways by reducing the costs of
product. Being the largest seller in groceries Sainsbury focused on innovating new products and
services in order to attract new customers and retaining the old customers by lowering the price
of goods(Koc, T. and Bozdag, E., 2017). The company has managed the challenges of new
entrance and build the effective measures to safeguard them from the competitors. Threats of
entrance is low in case of Sainsbury as it is established because it is difficult for the new
competitors to survive in this dynamic industry.
Power of suppliers
Most of the companies in retail industry purchase their raw materials from different
suppliers. Many suppliers misuse their positions and charge high prices from the retailer
companies. Sainsbury has managed the bargaining power of the suppliers by framing efficient
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supply chains with many suppliers and purchasing raw materials from various suppliers so that if
there are hike in price of raw materials of one supplier can shift to the other supplier (Liébana-
Cabanillas, F. and Lara-Rubio, J., 2017). The company has adopted the idea of dedicated
suppliers whose business depends on them. Where there are many suppliers the company kept
its input cost lower and to increase its profits.
Threat of substitute of goods
When any goods and services meets the similar consumer needs in other ways it increases the
threats of substitute and affects the profitability. Sainsbury focused on the quality of products
rather than focusing on quality service keeping in mind the needs and requirement of the
customers. A low threat to substitute goods increases the profitability and increase in the
substitute goods will decrease the profitability of the company.
Power of customers
Customers always prefer buying company products which offers discounts and offers.
When a company has good client base that is there is good communication between buyers and
seller , are satisfied with the quality of products they can negotiate for low prices. Sainsbury has
retained large customer base by maintaining the quality of products, and they also offered
various discounts and offer on their new products. The company continuously monitored the
changing market and customer needs and framed their strategies in order to earn profit.
Competition in the industry
Competitive forces and the related factors affects the profitability of the company. Large
number of competitors and the products and services they offer weakens a company. When their
there is less competition in the market and company has a monopoly, they can charge higher
prices to increase the sales and earn profit. When competition is high, to attract the customers
company lower their price of goods. Being an established firm in retail industry, Sainsbury
focused on the needs of the customers, quality product and offer customers affordable prices.
The company focused mainly on providing the best customer services by communicating with
them and knowing the needs and demands about the product.
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Porters value chain model
Value chain model refers to the business model which is established in 1985 by Harvard
Business School professor Michael Porter. The model consist of different stages of product or
services delivered by the organization(Strakova, et.al,2021). In a value chain analysis the
company includes each step of the business from beginning till the end. The aim of the value
chain analysis is to deliver effective and efficient product in the market in order to increase the
production. This framework is bifurcated into two types of activities such as primary and
another one is secondary activity. In order to support the primary activities the another activity
known as secondary activities The elements of value chain model which turn the plans of the
action into actuality for the growth of the firm will be elaborated further.
Primary activities
In a primary activity there are various components consist which are essential to increase
the scale of production and growth such as inbound logistics, operations, outbound logistic,
marketing or sales and services(Lubis, R., 2018).
Inbound logistics: this activity deals with the occurrence of the unprocessed substantial,
processed goods and services from manufacture or other distributors to the storage warehouse in
order to proceed the production in the business. In this logistic the products or unfinished goods
are received in the business, also includes transporting of goods from one place to
another(Fjeldstad, Ø.D. and Snow, C.C. 2018). Its main motive is to bring the goods for further
production in the organization as it include purchasing and supply of goods as well as services.
The largest retail company Sainsbury adopt this schemes in 2001 after losing the good position
in the marketplace. The company used to stock products to the regional distributional Centre
later on the company innovate the facilities for the distribution. The company cut-off the price of
transportation by developing fulfilment factory to render the service efficient. In this process the
manager or the responsible person of the organization evaluate the potential supplier in order to
obtain the best quality material through the distributional channels on time. The manager of the
company keep tracking the supply of goods and services. The products and the raw materials
required in business are ordered in bulk to mange the freight system properly according to the
demand of the supplies from the suppliers. The organization renews the networks, system and
technology in order to increase the production as soon as possible.
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Operations: in this process the production took place in the factories because it includes the
procedures of converting unfinished goods into a finished product. Along with the modification
of the product it covers other input and outputs of the organization. In order to generate profit
the product can be sold in higher price which also include the production cost as well as
transformation of inputs into outputs(Jnr, B.A., 2019). The company give finish touch-up to the
product after collecting raw material from manufacture. Along with the production the
organization fixed the price of the product which include expenses used in production. The
company used trucks as a mode of transportation for delivering the product from docks to the
supermarket. The organization lowers the cost of the production as per the demand of customer.
The company select the products very carefully. The product will be labelled with the brand
name so the product can be identified easily and develop image in the market with unique
identity. The supermarket of the organization is operated at high level. The organization work
with maximum amount of suppliers.
Outbound logistics: in the process of value chain the delivery of product and services is to be
done. This process includes the activities of warehouses and storage, inventory, transportation,
delivery and distribution channels9(Ricciotti, F., 2020). The manager of the organization mange
both the system internal and external system of the organization. The Sainsbury include third
party for the management of distribution within the organization. The organization reduces cost
of transportation. Company includes the branding, production packaging, shipping and delivery
of the packaging products. The manger of the organization mange the sales of the product and
supply the demand to customer fort the particular product. Shipping of the product from one
place to another is to be done under the outbound logistics. The company hold the stock in the
fulfilment factories which includes the movement between the local suppliers and RDCs. The
company prefer to supply the product directly from stores and departments in order to maintain
good relation among the workers.
Marketing and sales: in this process of primary activities marketing of the product is to be
done to increase the sales of the products and services. It includes marketing and branding of
the products in order t generate sales, profit and production. It attracts the customers and spread
the awareness among thee people about launching the product of the company. The companies
or business firms reach to the marketplace to seek the attention of public. The Sainsbury offer
wide range of the market to its customers. The company establish ad campaigns in newspaper,
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radio, television and social media. For the marketing of the product the organization used both
the strategies such as BTL ans ATL. The company also formed the Nectar reward card in
context to generate more sale in which point is to be earned by the customer on purchases of
product and redeemed on next sales.
Services: this refers to the services which company offers to the customer before and after
selling of the products and delivered in a effective manner for the customer satisfaction, this
component of primary activity help in maintaining relation in the market as well as with the
customers (Cicatiello, et.al, 2019). This improves the reputation of the product in the market and
give assistance in increasing the scale of production and sales. The company offer facilities to
the customer after selling of the product, the customer can approach the organization if any issue
arises. The organization is able to maintain long term relation in the marketplace and able to
compete the competitors. Through the feedbacks to manger or the leader of the organization able
to develop new skills for the organization. Due to good services offer to the customer every
individual support the product of the organization. In context to attract more clients, the firm
provide digital services or online platform to the customer.
Secondary activities
This activity give assistance to the primary activity. It includes some other components
of the organization namely procurement and purchasing, human resources' management,
technology development and company infrastructure.
Human resources' management: this activity consists of various functions of human
resources management or it refers to the management of human capital. It includes management
of the organization performance such as hiring, staffing, training, guiding and organizing the
function in efficient way. It also includes the maintenance of good relation with the clients as
well as with colleagues (Jnr, B.A., 2019). The company Sainsbury use human resources
managements plan of action in order to acquire fiscal position in the market. The company
select its best candidate according to the work demand of the company with the assistance of
selection process. The company offer right position to the candidate in context to play perfect
job role within the organization. The manager of the organization encourage or motivate the
employees by organize learning process in the company with the help of self manage learning
process. The HRM policies of organization allow leader to solve the personal as well as
processional issues of the employees in context to treat the workers as the asset of the
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organization. The manager provide training to the employees for delivering the best services to
the customers and support staff in order to achieve higher growth for the organization. The
human resources departments support the staff in decision-making and give helping hand in
disciplinary action. The department of the organization take the responsibility of maintaining
relation with employees and customer to acquire the organizational goal.
Firm infrastructure: it refers to the activity which is consisted of various activities which
includes strategical engagement, designing of plan, economics, accounting, legal, quality
establishment and authorities concern(Ezeomah, B. and Duncombe, R., 2019). The firm
infrastructure of Sainsbury is very supportive with the help of value change analysis as the
company is diversified. The finance and planning department of Sainsbury are managed and
operated at cooperate level. The other department of organization such as quality management,
accounting and judicial issues are managed at business unit level. With the assistance of
informational technology the organization able to manage the infrastructure of the firm. The
organization develops impassive digital experience for the customer by providing digital
platforms in the market. The infrastructure of the company is modified according to the rapid
changes in modern world. The online platform helping the organization in generating more
customer as the company focus on web experience. The financial management if the
organization work on overhead costs and manage balance-sheet in order to compare the
profit/loss and expenses of the organization. The financial report is to be managed frequently to
acquire the Monterey information on regular bases. Therefore, the organization mange to deliver
good quality of management services to the customers.
Technological development
In today's time period almost every activity involved in value chain relies on technology support.
In Sainsbury technological development has become a source of competitive advantage. It
includes the operation such as engineering, field testing, technology selection, component design
managing the information, minimizing the information technology costs, marketing and staying
updated with technological changes.
It can also categorize into product and process development activities such as hardware,
software, procedures and technical knowledge by which the company's inputs are converted into
outputs(Rustomjee, Z., Kaziboni, L. and Steuart, I., 2018). Shopper uses app to scan for the
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products they bought and moreover they have improved the productivity of Sainsbury's online
selection of products by adopting and upgrading their technology.
Procurement-
Procurement in value added refers to the process involved in buying the inputs and includes raw
materials such as equipment, machinery and other products which is required for producing
finished product as without raw materials their will be no output(Halsbenning, S. and Niemann,
M., 2019). Through this process company acquire the resources to operate and receives final
output and also includes finding the beat seller and getting the raw materials at the best price by
negotiating. The activities at Sainsbury involve and are undertaken to purchase the inputs that
are used in manufacturing the products of the company and involves raw materials, office
equipments etc.
Unlike all the value chain activities it also employs the technology for various things such as
procedure, management of vendor, rules of the company, performance evaluation and
information system. It is an effort of discovering and getting the supplies for the efficient
working of the organization. Procurement also supports various operations such as it supports
the marketing and sales with other activities.
Recommendations-
Strategic management is a process of managing the company's resources in order to
achieve the desired objectives. It main aim is to provide the overall directions by framing
various plans and policies and adequately utilizing the resources to implement the plans to fulfill
the goals(Akhmetshin, et.al, 2018). It also involves the various approaches by examining the
environment situations, framing the strategies and implementing them. A strategic plan helps
the decision maker to understand the directions in which the company is headed and the current
position by receiving the progressing and focusing on improving and development. It works as a
tool that keeps a track of the company's financial growth.
Sainsbury's should consider various strategies for regaining its place in the retailing
industry, for this the organization needs to frame its policies that goal is to expand its operations
in different regions to take competitive advantage in the market. The company should develop
its structure so that it seeks on improving the customers experience in relation to retail store as
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well as online. The essence of the expansion of its operation in the new market will result in
increased revenue aiming to surpass its main competitors in the market.
The company should include the combination of various incremental strategic plans in
the management process. To make the management programs effective, the company should
adopt various human and financial resources, organizational structure and technological
infrastructure.
Unlike Tesco gave importance to the needs and satisfaction level of the customers which
resulted in increased sales which attracted the customers to purchase their products. Setting up
clear and improved strategies and policies will assure that Sainsbury acquires competitive
advantage in the UK retailing industry. Being in a retail industry, the company should be
realistic for efficiently achieving its goals and vision. It faces various barriers and problems that
can affect its management process but with the help of new and innovative plans, can overcome
these challenges.
CONCLUSION
Upon considering various perspectives and models it can be concluded from the report
that strategic management is a continuous process which is essential for the success of the
organization. Sainsbury has immensely diversified their operations and develop competitive
advantage by adopting Porter's value chain and porter's five forces model to analyze the factors
influencing the profitability of the company. It should focus mainly on innovating new products
and improving the food quality which will benefit the company as well as the customer.
The company should lay emphasis on changing the business and simplifying its
operations and intensify their cost saving programs and invest in improving the food quality,
innovation and lowering the price for the customers by offering different discounts and deals.
Sainsbury should use various sales promotion schemes to attract customers to buy their products
and services by cutting their prices on the products .Analysis of value chain has observed that
Sainsbury has resource advantage that involves inbound logistics and infrastructure that helps in
assuring the competitive advantage in the market. It is observed that the company has given
major importance to the marketing plans on lowering price as well as on improving the quality
of the products they are manufacturing.
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REFERENCES
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Fjeldstad, Ø.D. and Snow, C.C. 2018. Business models and organization design. Long range
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Halsbenning, S. and Niemann, M., 2019, July. The European Procurement Dilemma-First Steps
to Introduce Data-Driven Policy-Making in Public Procurement. In 2019 IEEE 21st
Conference on Business Informatics (CBI) (Vol. 1, pp. 303-311). IEEE.
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Rustomjee, Z., Kaziboni, L. and Steuart, I., 2018. Structural Transformation Along Metals,
Machinery and Equipment Value Chain–Developing Capabilities in the Metals and
Machinery Segments.
Sedevich-Fons, L., 2018. Linking strategic management accounting and quality management
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Straková, et.al, 2020. Use of the Value Chain in the Process of Generating a Sustainable
Business Strategy on the Example of Manufacturing and Industrial Enterprises in the
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Strakova, et.al,2021. The Value Chain as the Basis of Business Model Design. Journal of
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