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

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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