Porter's Five Forces and Strategic Tools for Sainsbury

This essay explores the use of four strategic tools - SWOT analysis, Porter's generic strategy, Porter's five forces, and Ansoff matrix - for developing effective strategies to increase growth and profit in the UK market. The tools are helpful for Sainsbury to gain a competitive edge in the retail industry and manage changes such as competitive rivalry, supplier power, buyer power, threat of substitution, and threat of new entry.

STRATEGY
DEVELOPMENT TOOLS
AND HOW THEY ARE
USED

Table of Contents
INTRODUCTION....................................................................................................................... 1
MAIN BODY.............................................................................................................................. 1
CONCLUSION............................................................................................................................ 3
REFERENCES............................................................................................................................ 4

·INTRODUCTION
Strategy development tools are the ones which are used for developing a effective
strategy upon the analysis of various external and internal factors which can effect the activities
and functioning of the organisation. Managers of an organisation needs to implement and
develop a effective strategy using various tools such as Five Forces, SWOT Analysis, Generic
Strategies, Ansoff etc. for analysing the different factors. The organisation taken in this essay
report is Sainsbury which is a supermarket chain located in United Kingdom. Sainsbury is a
retail chain store which was founded in 1869 in London. This essay report will discuss the
various strategy tools along with their use in the organisation with examples.
·MAIN BODY
Strategic tools are most useful for any organisation in order to analyse the influence of
various internal and external factors which can hinders the activities and operations of the firm
to achieve the desired organisational goals and objectives (Grant, 2016). The strategic
development tools which will be discussed in this report are SWOT analysis, Porters generic
strategy, Porters five forces and Ansoff matrix. Uses and definition of these tools will be
discussed further in details.
SWOT Analysis
It is an effective tool which is used for analysing the internal factors such as strengths
and weakness and external factors such as threats and opportunities in an organisation. Sainsbury
is also using the swot analysis for determining the impact of internal and external factors on the
business activities and operations of the company. Strengths of Sainsbury are that it is 4th
largest supermarket brand in UK as a result its customer base and expansion activities in UK are
increasing at a rapid speed (Jarzabkowski and Kaplan, 2015). The promotion policies are also
very effective of the company as it attracts large base of customers. Company is also providing
coupons and offers to their regular customers through online channels. Weaknesses of Sainsbury
includes risks from brand switching because of which company is facing problems in retaining
their customers. Company is providing their products on low prices which is no longer good for
sustaining in the market. Growing cost of technology and raw materials are hindering the
activities of firm as the firm is providing its products at low prices. Threats includes growing
competition from Tesco, Aldi and M&S due to which company is facing problems in getting an
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upper competitive edge. Sainsbury has opportunities for expansion in Rural areas of UK which
is due to increasing brand awareness of the firm (Kumar and Reinartz, 2018).
Porter's generic strategy
It provides necessary way to Sainsbury for achieving an upper competitive edge in the
market over their competitors. Four strategies is used by the Sainsbury in the strategic
development tool in order to get an upper edge over the competitors in the UK market and also
to develop necessary strategies for enhancing growth and expansion. Cost leadership strategy
states that organisations such as Sainsbury needs to offer high quality based products to their end
users for increasing their market share and profit to get a competitive edge. Through this
strategy, Sainsbury can increase the sales and profit by providing high quality products.
Differentiation strategy states that Sainsbury needs to offer unique and innovative goods to their
consumers for achieving the mission of enhancing the growth and market share in UK. Through
this strategy, Sainsbury can introduce unique products which will differentiate them from their
competitors. Cost focus states that Sainsbury needs to focus on their industry and needs to
provide the goods at lower prices and better quality than their competitors in order to get an
upper edge over the rivals (Paroutis, Franco and Papadopoulos, 2015).Through such strategy,
Sainsbury can offer its products at low prices which will ultimately improve the sales of the
products offered by the company. Differentiation focus states that Sainsbury should provide
their goods with unique features in order to differentiate them from the competitors. Through
these above mentioned strategies, Sainsbury can improve their market share and profit in UK
market.
Ansoff growth matrix
It is a tool which is used by Sainsbury for planning the strategies and provides a
systematic structure for implementing effective strategies for future growth and success. The 4
growth strategies of this model are discussed further. Market penetration strategy focus mainly
on enhancing the market share through selling the existing products at low prices in existing
market (Remington and Pollack, 2016). Through this, Sainsbury can improve their profit and
productivity in the existing market. Product Development strategy focus on introducing new
product in the existing market with some modifications in features for meeting the demand and
to increase the market share. With improved quality, customers can easily attracts towards the
product which will increase the profit and sales of product. Market development strategy focus
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on providing existing products in new market for increasing the market share and customer base
and also for increasing the brand image. Through this, Sainsbury can expand in other markets
(Rowledge And et. al., 2017). Diversification strategy focus on introducing a new product in a
new market for expanding the business by using proper analysis of risks and investment needed.
This strategy is risky for Sainsbury than the other 3 strategies discussed above.
Porters five forces
It is a simple and effective tool used by Sainsbury for determining the competitiveness in
the existing industry and for identifying the potential strategies for profitability (Shaw, 2016).
These forces are divided in 5 factors as discussed further. Competitive Rivalry states that when
the competition in retail industries is very high then firms needs to lower the prices of their
products which will reduce the profit of company. Supplier Power states that when the suppliers
in retail industry are few then they have the power to bargain with firms for increasing the
margin. These suppliers can effect the profit of the firms and tries to increase their profit. Buyer
Power states that when the buyers wants to purchase the products at low prices which puts
pressure on firms in terms of profitability. The smaller the size of customer base, the more is
their buying power. Threat of Substitution states that profitability of industry suffers when a
newly developed product meets the expectation of customers in various ways (World Health
Organization, 2015). The threat of a substitution is very high when it offers a unique and
innovative product to the consumers. Threat of New Entry states that new firms in industry
brings innovative products using strategies such as lower price strategy, reducing cost of
products etc. Sainsbury needs to manage all these changes by using porter five force analysis for
overcoming the barriers easily and to safeguard its competitive position in UK retail industry.
·CONCLUSION
From the above discussed essay it can be said that the above discussed 4 tools i.e.
SWOT analysis, Porters generic strategy, Porters five forces and Ansoff matrix are helpful for
Sainsbury for developing effective strategies for increasing the growth and profit in the UK
market. Through these tools organisations can increase their market share as well as to gain a
competitive edge in the retail industry.
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·REFERENCES
Books and Journals
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Jarzabkowski, P. and Kaplan, S., 2015. Strategy tools-in-use: A framework for understanding
“technologies of rationality” in practice. Strategic Management Journal. 36(4). pp.537-
558.
Kumar, V. and Reinartz, W., 2018. Customer relationship management: Concept, strategy, and
tools. Springer.
Paroutis, S., Franco, L.A. and Papadopoulos, T., 2015. Visual interactions with strategy tools:
Producing strategic knowledge in workshops. British Journal of Management. 26.
pp.S48-S66.
Remington, K. and Pollack, J., 2016. Tools for complex projects. Routledge.
Rowledge, L.R. And et. al., 2017. Mapping the Journey: case studies in strategy and action
toward sustainable development. Routledge.
Shaw, S., 2016. Airline marketing and management. Routledge.
World Health Organization, 2015. Global technical strategy for malaria 2016-2030. World
Health Organization.
Online
Porter's five forces. 2018. [Online]. Available
through:<https://www.tutor2u.net/business/blog/sainsburys-suppliers-and-porters-five-
forces>
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