Strategic Management: Analysis of Sainsbury's using VRIO, PESTLE and Porter's Five Forces Model

This report provides an analysis of Sainsbury's using VRIO, PESTLE and Porter's Five Forces Model. It includes purpose, vision, mission and objectives of the organisation, evaluation of four attributes under the parameter of VRIO, PESTLE analysis, and Porter's five forces model.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................3
1) Purpose, vision, mission and objectives of the organisation for setting the strategic direction.. 3
2)VRIO Framework of Sainsburry's................................................................................................4
3)PESTLE analysis of Sainsburry's.................................................................................................6
4) Porter’s five forces model of Sainsburry's..................................................................................8
5) On the basis of analysis, evaluate organisation strategy...........................................................10
CONCLUSION ............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Strategic management can be defined in the manner that it helps the organisation and
about its leadership to think in terms of future existence which fulfils the main responsibility of
the board of directors. It is the concept which sets direction for the organization and its
employees. It refers to the continuous planning, monitoring, analysis and assessment of all the
requirements of an organization which needs to meet the goals and objectives of the company.
Strategic management is important because it is for organisations to gain a competitive
advantage over their competitors. In this report, the analysis has been done on the value of clear
purpose, vision, mission and objectives for purpose of strategic direction of organisation(Lin,
and et.al., 2017). The analysis has also been done on the evaluation of four attributes under the
parameter of VRIO. The research has been done on PESTLE analysis for the selected
organisation and also on the Porter's five forces model. The research has also been done on the
strategy of organisation. The chosen organisation is Sainsbury's. It is the second largest chain of
supermarkets in the United Kingdom. It is headquartered in London, United Kingdom. This
company was founded in the year of 1869 by John James Sainsburry. Along with a shop in Drury
Lane, London. This company became the largest retailer of groceries.
1) Purpose, vision, mission and objectives of the organisation for setting the strategic direction.
Purpose: The core purpose of the organisation is to provide good or great food at a fair
price. The company believes in being fair to their suppliers and environment and also do not cut
corners for short term profits. Being fair to their customers in such a manner becomes a
challenge for the company in terms of earning profits(Sibony, and et.al., 2017). So by providing
goods and services on reasonable prices to their customers loses the advantage of growth of
company in a strategic manner because they are more focused towards their customers. And
forget about their strong stand in international market.
Vision: The company's vision is that to be the most trusted retailer where people have the
comfort zone to work and shop in a very simplest way. It means that harnessing the talent,
creativity and diversity of their co-workers which ensures about customers receive good services
every time they do shopping with company. For becoming the trusted retailer, their focus has

been diverted from their employees creativity and new ideas. Due to which company has
followed the structured pattern for attracting more and more customers.
When company does not comes with unique ideas and invention then it becomes difficult for
company to come at the top position in international market.
Mission: Organisation mission statement is that to be the consumer's first choice for food,
delivered products with a high quality and great service at a competitive cost through working,
faster, simpler and together(Brymer, and et.al., 2015). For setting strategic direction for the
company, it is important to understand that while in the process of becoming first choice of their
customers company forgets somewhere about the core values of company. So it is necessary that
while going upward in market they do not need to forget about their ethics of company.
Objective: Company's main objective is that to provide outstanding quality and choice. For
achieving this objective they need to be committed towards their customers with quality and
choice in terms of both food and non-food sector (Demirkaya, Y., 2015). When company is too
much concern about their customers then they forget about their new trend which needs to be
bring into market. Due to which it is possible that they lack in terms of moving along with
changing market up to certain extent. For setting the strategic direction it is important that they
should be focused on their goals so that they do not forget about their daily task.
In the overall manner, company's mission, vision, objectives and purpose is the perfect blend of
providing the quality services to their customers at a fair price and deliver it in within period of
time (Mackey, and et.al., 2017). So it needs to understand for setting strategic direction for
organisation they do not need to forget about their goals otherwise the direction of the way of
working has been changed. Due to which many conflicts have arises and as a result it becomes
challenging to direct employees for their defined roles and responsibilities.
2)VRIO Framework of Sainsburry's
VRIO framework is an internal analysis tool which has been used by organizations for
the purpose of categorization of resources which is based on whether they hold certain traits
within this analysis.
 Valuable: Under this head, it talks about the resources which are valuable for
Sainsburry's. There are some critical resources which are valuable to the firm in terms of
financial resources, human resources, marketing expertise and operations management.

 Rare: Resources that are valuable for them are rare and costly to attain and this needs to
be asked by company. The resources are valuable but they are common in terms of
nature(Krzakiewicz, K. and Cyfert, S., 2017).So it becomes challenging to compete in
market place. The rarity hold by company is that it owns a bank which was opened in the
year of 1997 in UK. The bank offers variety of services which includes savings, loans,
credit cards and insurance. There are some factors which are uncommon in retail
industry. It includes personnel, new commodities, association with staff, promotion of the
brand and willingness with acquirement.
 Imitable: Under this head, it occurs when different competitors in the industry can
imitate in such a manner an organization conducts it business operations. It is that store
which has established themselves in U.K. Market and controls a large share of market. It
is difficult for competitors to imitate since it involves a range of activities due to which
company has a unique market strategy . Its network of operation can only be applicable.
Illustration: VRIO Model

Source: ManagementMania.com
 Organisation: The structure of organization is an internal strength which has enabled
Company has operated large number of supermarkets, convenience and argo stores. The
exploitation level of analysis of company products can be done from two
perspectives(AM Vermeulen, and et.al., 2016). This is used for purpose of analysing the
potential resources of organisation. Execution team and execution strategy of the firm is
basis of exploitation level. For assessing the quality of human resource in the
organization, exploitation level is a good parameter for it. Capabilities have been arises or
expand over period of time as an organization takes action in terms of that building
strategic resources.
Competitive advantage for the organisation is that to create reputation, brand image and it should
be in terms of innovation, range and quality. While making shopping more convenient and easier
it offers consistent value to their customers . Their different kinds of resources of separate
department makes them valuable and their banking facilities makes them unique in the market. It
has been opened on earlier basis as compared to their other competitors in market.
Their marketing strategy at international level gives them competitive advantage as compared to
other players in market. The organisational ability in market makes them different from other
competitors due to its diversification into different fields like food and non food sector, banking
facilities and argos sector also(Wheelen, T. L., 2020). In overall manner for finding out
competitive advantage of the organisation, VRIO framework plays a very important role for
evaluation of every aspect of organisation.
3)PESTLE analysis of Sainsburry's
PESTLE analysis is a tool which is used for purpose of analysing key factors. It includes
political, economic, sociological, technological, legal and environmental factors(Malhotra, and
et.al., 2015).This analysis contributes towards influencing an organization from outside factors.
This analysis gives a focused approach for entire environment from different perspectives where
it checks and contemplates the particular idea or plan.
 Political Factors: In country of U.K. It is second largest super market. It mainly
operates in U.K. market That's why it is not going to be affected by slowdown in
economy in different countries(Meredith, and et.al., 2017). It will have certain

consequences on company's business since the U.K. has exited from European Union.
After exit of U.K. inflation rates got high and pound also get low which further leads
towards decline in customer expenditure. Due to decrease in sales rate in U.K. It has been
observed that effects are in short term way. With context of Sainsburry's, economic
stagnation plays a very important role in changing political condition of country.
 Economic Factors: When inflation rate got high and growth rate of income remains
same then it has decreased when there is demand for goods from supermarkets stores
U.K. has faced sometimes the economic stagnation situation so it creates a opportunity
for investing in growing markets where economy is growing at a faster rate than the
overall average economic growth. The good option for company is that invest in those
countries with good economic forum. So it seems like that companies with good
economic freedom generally have higher chances of growth of avenues.
 Social Factors: In today's time customers are more interested in buying goods from
super markets rather than local retail stores.
This is because of reason that these stores provides all kinds of goods under one head. Super
markets also provide certain special schemes which gives certain discounts to their
customers(Capelo, and et.al., 2015). In this way, customer receive certain kind of satisfaction
that they are saving certain percentage of their income. Super markets gives the facility that they
can purchase more as compared to their previously set target. This can be possible with the
reason of element of surprise of seeing a new and unexpected products that they are thinking of
buying it.
 Technological Factors: From perspective of vehicles, Sainsburry's has been able to
provide latest technology. In later period of time, they have come up with idea of option
to collect it from local stores and online selling of food. Due to advancement in
technology can reduce product overall cost of production.
 Legal Factors: When Sugar tax has been introduced into U.K. Market, the organization
needs to make amendments for purpose of saving money and tax in a strategical manner.
Rules have been introduced to stop promotion for high-fat, salt and sugar foods for the
children who are below the age of sixteen. When regulatory authority gives permission
for product the it can be launched into market.

 Environmental Factors: In today's time, it is the expectation from the organisation to
be eco friendly and this is majorly from point of view of government and people of
country. It also working towards it and followed and support U.N. Sustainability goals
(Puertas Hidalgo, and et.al., 2015). Company has taken initiative in reducing its waste in
Lamb supply chain and Beef . Decrease of carbon emissions in its operations and also
working towards it. In context of Sainsburry's, they can use electric vans instead of gas
ones and can also go with approach of paperless perspective in order to save paper at a
large scale.
So this analysis highlights the various elements of which impacts the business performance.
4) Porter’s five forces model of Sainsburry's
These are the forces which has been used as business analysis tool which explains that
why various industries are able to sustain at different levels of profitability. This five forces has
been used in the frequently manner for purpose of measuring competition intensity,
attractiveness and profitability of an industry or market.
 Threats of new entrants: Pressure has been built on company when new entrants brings
innovation into market and the innovative ways of doing work. It can be created through
Illustration : Porter's five forces model
Source : SWOT & PESTLE.com

certain parameters which includes lower pricing strategy, reducing costs and gives new
value propositions to their customers(Alves, and et.al., 2019). New entrants through
innovating new products and services and in this way company can tackle the threat.
Innovative products brings not only new consumers but also gives reason to buy new
particular company's products. It can be also tackled through building the economies of
scale so that it can lower the fixed cost per unit. With support of building capacities and
spending money on research and development. Then it becomes difficult for other
competitors to stand strongly in market when Sainsburry's gives regular standard in
market. In context of Sainsburry, there has been less chances of entrance of entry of new
competitors because Sainsburry has already defined standards in a well mannered way.
 Bargaining power of suppliers: Suppliers who are dominant in terms of their position
can decrease margins company can earn in the market. In retail field, higher prices can be
extracted from the firms through their negotiation power. Company can tackle bargaining
power of suppliers through multiple suppliers with support of building efficient supply
chain. By experimenting with product designs with help of different materials so that
company can shift themselves to another if the prices go higher of one material. In
context of Sainsburry, company can learn from Wal-mart and Nike that how these
companies can develop third party manufacturers whose business mainly depends on
them only. These third party manufacturers have less bargaining power as compared to
Wal-Mart and Nike.
 Bargaining power of buyers: Buyers always want best products for themselves. They
always want best offerings by paying the minimum prices for it. This creates pressure on
company's profitability in the long run. As much as the company's base is strong the
higher will be the bargaining power of the customers and higher is ability to seek larger
profits and discounts. This can be tackled through by creating a large base for customers
so that it will help in two ways(Dagnino, G. B. and Cinici, M. C. eds., 2015). It will
reduce the bargaining power of buyers along with the opportunity for streamlining its
sales and production process. It can be also tackled through rapidly innovating new
products. On established products customers seek offerings and discounts and if the
company comes constantly with new products then it can limit the bargaining power of
buyers. It can also be tackled through new products which will reduce the desertion of

existing customers of company to its competitors. In context of Sainsburry, if company
comes with new products on continuous basis then it can limit bargainig power of buyers.
 Threats of substitute products or services: Industry profitability suffers at that time
when new products or services meets the similar customer needs in different ways. The
threat of products and services is high if it offers the high value proposition which is
uniquely different from present offerings of the industry. It can be tackled through
becoming service oriented rather than product oriented. It can also be resolved through
understanding the need of customer rather than buying products. In context of
Sainsburry,if company continuously work on their products and services then there will
be less chances of threats of products and services in market at international level.
 Rivalry amongst the existing products: It can be tackled through by building a
sustainable differentiation and also by building scale so that it can compete in a better
way(Stahl, and et.al., 2017). It can also be resolved through collaborating with
competitors for purpose of increasing the market size rather than just competing for small
market. In context of Sainsburry,if company stand strongly in market and do not give any
chance to other competitors to give tough competition then there will be less chances of
rivalry amongst the existing products.
In this way, these five forces applied on the organisation.
5) On the basis of analysis, evaluate organisation strategy
According to Sainsburry's strategy, their clear priority is to build or create a strong brand
heritage. Also need to create reputation in terms of quality, range and innovation. Focus is on
providing the consistent value to their customers while making the shopping more convenient.
According to different types of analysis it has been observed that company is very clear about
their goals and objectives.
PESTLE analysis helps in analysing the external environment of business. There are different
factors attached to this analysis due to which it has been changed over the period of time.
Specially in pandemic situation company has to make changes in their way of working and
strategies formulated for post pandemic situation. Sainsburry's has focused their work towards
online selling in this difficult situation so that no break has been created in providing services to
their customers.

Porter's forces helps in understanding towards powers from different perspective. It can be either
from supplier or it can be from buyer's way(Teece, D. J., 2019). In terms of ensuring their
position in market these forces shows that company needs to be very careful and has to be agile
in terms of nature. The vision, mission statement of company is very strong and also decisive
action has been taken according to requirement of condition. The objectives of organisation has
been constantly changed or amended according to the requirement of time. According to VRIO
analysis, it has been observed that there are some parameters which are unique in terms of value,
rarity, imitable nature and organisation. Due to these parameters, company act as strong key in
terms of competitive advantage. As a result, it can attract large number of customers.
For setting strategic direction for company it is important that they do not forget about their goals
otherwise they do not follow ethics of company. For running an organisation into consistent
manner for longer period of time it is important that they do not forget about their core values.
Because on the basis of core values strategies have been formulated for further growth of an
organisation(D’Cruz, J. R., 2018). The kind of strategies have been adapted by company
becomes the basis of achieving their vision of an organisation. Strategies are the kind of steps
taken by people of an organisation so that they can properly achieve their daily basis task. The
daily basis task mainly defines roles and responsibilities of the employee due to which it reaches
towards their target in a more strategical manner. Sainsburry's strategy is very defined in nature
so that no one face problems in following those steps. So its important that strategies have been
evaluated over the period of time.
CONCLUSION
Strategic management plays a very important role in the world of business. It is an
ongoing which monitors, evaluate, analyse every aspect of an organisation. So that no loop holes
can be created while executing their services to customers. For this purpose company needs to be
very clear about their objectives, vision, mission and purpose of an organisation. For setting the
direction for a company different kinds of analysis and forces have helped in analysing
performance of an organisation. These analysis include VRIO framework, PESTLE analysis and
porter's five forces model. VRIO framework helps in analysing how an organisation creates

competitive advantage at international level. PESTLE analysis gives the idea about different
factors which create influence in the performance of an organisation over the period of time. This
kind of analysis also supports in external environment evaluation. And the porter's five forces
gives idea about how to stand strongly in market at international level. In terms of strategy of an
organisation they have to focus on their goals and objectives so that they can satisfy their
customers into successful manner. And it is important to give first priority to their customers so
that it helps in growth of company.

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