Strategy, Enterprise and Innovation: Analysis of Sainsbury's and the Grocery Industry

This article analyzes the impact of external factors on Sainsbury's and the grocery industry, including political, economic, social, technological, environmental, and legal factors. It also examines the competitive forces in the industry using Porter's Five Forces model and evaluates Sainsbury's internal capabilities and resources through a SWOT analysis.

STRATEGY,
ENTERPRISE AND
INNOVATION

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY ..................................................................................................................................3
CONCLUSION................................................................................................................................7
REFRENCES ..................................................................................................................................8

INTRODUCTION
Strategy, Enterprise and Innovation subjects group are actively engaged in knowledge
and research transfer to the four key areas of research that are business strategy, innovation
management, risk management and entrepreneurship. It mainly focuses on the teaching with up
to date and on applied research which is helpful in addressing the business needs and aiming
close the loop among informed teaching of research and business research which is then able to
fill the potential gap between practice and theory.
J. Sainsbury is second biggest chain of supermarket across United Kingdom. The
company was founded by John James Sainsbury in 1869. Company had its headquarter in
London. 15.3% of market share of Sainsbury in the supermarket sector. The holding company J
Sainsbury Plc has been splits into three division that is Sainsbury's bank, Sainsbury's
supermarket Ltd. Concluding convenience shops and stores and Sainsbury's Argos. The above
report includes the identification of external factors with the key driver of change in the
organization. Evaluating impact of competitive forces which directly influence profitability and
entrepreneurial activities among industry by using Porter's Five Forces. The report ends with
analysation of internal capabilities and resources which is helpful in company for its competitive
advantages.
MAIN BODY
PESTEL Analysis -
Current environment of business which affected the grocery relating industry of UK are
made up of macro and micro environment both. The most common layer is of macro
environment which is consisted of broad factor of environment which impact the all
supermarkets across UK. Many of the Macro factors directly impacts the Sainsbury's and its
rivals so it is very important for the company's management to identify this factors. The macro
level factors are analyzed with the help of PESTEL which are used to access through future
trends in economic, political, social, legal and technological and environment which directly
impacts industry(Aarstad, Kvitastein and Jakobsen, 2019).
Political Factors – The Brexit has an adverse effect on both economic and political uncertainty
and up heal of the UK's economy. The exit of Britain from EWU has caused and drastic impact
on economy that includes devaluation of pound which leads to have a sluggish econo0my along

with depression among growth of wages, high inflation among the market which result in decline
of consumer purchasing power somehow it directly affects the business of Sainsbury. It had a
negative impact on the growth and profit maximization of company. The number of consumer
visiting to supermarket has decreased and thus the sales of the Sainsbury decreased significantly.
Economic Factors -
The inflation in the pricing of food and the depressing growth of wage in UK which is
economic stagnation for long years. The purchasing power of the consumer somehow decreased.
The rise in the discounters like Lidi and Aldi who provide food products at steeply discounted
prices which have an adverse effect on the retailing market of food. Thus, Sainsbury is moving in
the market with their low prices to their customers since 2015. as fall in the price and low price
lead to have a low margins and profits to the Sainsbury which is not good for the economic
condition of company.
Social Factors -
Economic factors like high inflation, low wages are the primary cause of change in the
shopping habits of the consumers by which the grocery industry of UK is affected. Social
changes are also driving grocery retailing. As many of the consumer instead of spending their
weekly bug food shopping at supermarket, availing through which local stores especially which
provides huge discounts and shopping with internet. These affects profit and sales of big
supermarkets like Sainsbury's. The forecasting of IGD as stated that the consumer spending to
hypermarkets and superstores have been declined from £73.7bn to £70.8bn from last five years
whereas at same time the sale of convenience grocery and discount retailers has been doubled. It
does not affect much the Sainsbury as the company has it self develop the online food shopping
and operating 806 convenience stores across UK which is helpful in increasing the sale y 6% as
compared to other rivals in market(Yang and Lu, 2017).
Technological Factors -
As all the business are moving forward to the digitization Sainsbury has also adopted the
digital trend and had introduced digital service for their consumers like click and collect services
where consumer can easily place the order and further can collect that order from local
supermarket and online food shopping. Thus, the online retail store has been hiked by 80% and
the orders are raised by 20% which is helpful for the Sainsbury to cope with rapidly changing
behavior of consumer.

Environmental Factors -
Sainsbury had strive hard to reduce wastage within their operational activities by
initiatives of internal organization and collaborating with partners. Sainsbury collaborated with
Waste & resource Action Program (WRAP) for minimizing sustainable packaging of the food
products across the supermarket and along with food waste. Na the surplus food is to be
delivered to the charitable organization which addresses the social economic aspects of the
Sainsbury's business. The target is set by Sainsbury to reduce the carbon emission by 30% in
their operation. Thus, for this they have innovated to use refrigerant gas in their optimized
transportation and trucks(Newth, 2016).
Legal Factors -
The approval of regulatory in the UK has impacted to delay in the decision-making and
business growth of the Sainsbury. New “Sugar tax” that has been introduced by government of
UK which aims to reduce content in sugary drinks by 20% till 2020, which directly impact the
Sainsbury own brand products in the supermarket. New rule of banning the advertisement for
salt, high-fat and sugar (HFSS) drink or food products for children under 16 which restricts the
promotional and marketing activities of Sainsbury in UK.
Porter's Five Forces :
Porter's five forces is tool which is helpful in analyzing competition of business within
the marketplace. It is drawn from economics of industrial organization which is derived from
five forces which can be helpful in determining the competitive intensity and thus attract industry
towards profitability(Lai, Lin and Wang, 2015).
Powers of Buyers – The customers of Sainsbury's have relatively high bargaining power because
of availability of other supermarket like Asda, Aldi, Tesco, WM Morrisons etc. which are
suffering similar products at same price. Which in result to have low cost of product switching,
and providing a chance to consumer to choose among offers by rivals at the same price.
Power of Suppliers -
The bargaining power of supermarket is intentionally low because of existence of many
suppliers within the retail industry of supermarket and thus the non-complaint suppliers can be
changed with other suppliers who provide supermarkets like Sainsbury's power of getting

products at possible lowest prices for improving and raising the profit margins(Gerashchenkova,
2017).
Threats of Substitutes -
In the grocery market threats of substitute is very high for both non-grocery and grocery
items. This is due to that the potential food substitute across the retail market could not just offer
drinks and food they can also include the non-food products which are electronic, clothing,
furniture etc. For example, the department store can also include the non-food retailers with
distribution and scale for competing with Sainsbury. These companies are Primark. Debenhams,
BHS and House of Fraser etc.,
Competitive Rivalry -
Big competition is faced by Sainsbury from its competitive rivals such as Asda, TESCO
and Morrsions who are availing to provide similar products that are food items, electronics and
clothing etc., at similar marginal cost by which the switching cost of product is low where a
buyer can easily switch to other supermarket which provides low prices. This lead to have a cut-
throat price wars, innovation in products and product advertisement especially withing the “Big
4”. Sainsbury is also facing significant competition from German discount stores Lidl and Aldi
which offers 40% discount on their product which have an adverse effect on the market share of
Sainsbury. Thus, Sainsbury is forced to merge with Asda to survive in the market with cutthroat
competition in retailing industry of UK(Altamony and et.al., 2016).
Barrier to entry / Threats of entry -
The threats of Sainsbury is low due to the structure of retail market that is 69.8% of
market share of grocery is controlled by 'big four' supermarkets. Thus, the new entrants in the
market aims to provide the high quality products at low price which is helpful in attracting
customers as the low cost leaders Aldi and Ldli which offers the products up to 40% discounts
which is a competition to all rivals. The food retailing market in the UK has created intense
competition which is unattractive for the moment which deters further entry(da, Casson and
Jones, 2019).
Analyzing internal capabilities and resources -
SWOT Analysis :
SWOT Analysis of Sainsbury is helpful in evaluating the strengths, weaknesses,
opportunities and Threats which are associated with operation and business strategy of

organization across UK and global market in the retail grocery industry. The opportunities and
strengths can be further utilized by Sainsbury for compensating weaknesses and developing
various strategy for threats from competitors and rivals.
Strengths –
Sainsbury has diversified business activities and operation across UK with the strong
market share of 16.9%. And company with considerably high sales and loyalty from customers.
Food and food products which are offered to consumer consist of more than 3,000 branded
products which aims to providing high quality products to customer at attractive
prices(Prokhorova and et.al., 2016).
Weaknesses –
The Sainsbury has a single operating market where all operational functions are
performed under one market no multiple operating are taken in marketplace. The company works
on the low margin food products thus the company had low profit margin on the products which
are to be sold.
Opportunities –
Sainsbury is trying to expand its business globally by collaborating online which is
helpful in the expansion of business for further growth. By opening online stores and
convenience stores the sales of the company has increased along with future opportunities are
also availed. Can use technological analytical to help their customer's insight.
Threats –
The adverse effect of Brexit on pricing have affected the profit margin and profitability of
Sainsbury. The intense competition in the market of grocery and retail industry which enables
the company to be in market and compete with them by effective strategies(Han and Xue, 2016).
CONCLUSION
From the above study it is concluded that internal and external factors directly affects
strategic appraisal of company. More market share are to be attained by organization to achieve
short and long term objective of company within the prescribed time period. This can be done by
providing high quality products to consumer at attractive prices. That's why Sainsbury aims to
merge with Asda to compete effectively with other rivals in the market and thus effectively been
in the market for long term. And by accessing on online platform company can easily raise their
sales and online orders this somehow increases the profitability of the company.

REFRENCES
Books and Journals
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