Business Environment Analysis: Impact of ASDA and Sainsbury's Merger

This report provides a comprehensive analysis of the business environment surrounding the merger of ASDA and Sainsbury's. The introduction defines corporate strategy and highlights the significance of the merger for growth opportunities, customer base expansion, and market share. The report employs PESTLE analysis to assess external factors such as political, economic, social, technological, legal, and environmental influences, and Porter's Five Forces to evaluate industry dynamics, including threats of substitutes and new entrants, bargaining power of buyers and suppliers, and the intensity of rivalry. Further, the report analyzes the organization's resources and unique capabilities, specifically highlighting the joint venture with ASDA and the presence of highly skilled employees. The report also examines the strategies employed by the company and evaluates their effectiveness. The conclusion summarizes the key findings and provides recommendations based on the analysis.

Business environment

Table of Contents
INTRODUCTION......................................................................................................................3
TASK 1......................................................................................................................................3
External analysis....................................................................................................................3
Industry analysis.....................................................................................................................6
TASK 2......................................................................................................................................7
Organisation’s resources & unique capabilities.....................................................................7
TASK 3......................................................................................................................................9
Strategy evaluation.................................................................................................................9
CONCLUSION........................................................................................................................10
REFERENCES.........................................................................................................................11

INTRODUCTION
Corporate strategy is defined as organisational decisions which are taken by their
management within a business so as to expand the business and implementing operational
strategies in order to safeguard the entity by making appropriate decisions which lead to have
organisational success. The corporate strategy is helpful for the business in having clear idea
about vision of the business and to allocate available resources in an appropriate manner.
Corporate strategy prioritises the available resource and then help in reducing business risk so
as to get business growth in minimum time. The case taken in the report is merger of ASDA
and , this merger is opening several growth opportunities for Sainsbury’s and provide them
way to cater huge population and make huge customer base. This report includes porter five
force model which is helpful in analysing the competence and opportunities hold by the
industry and VRIO analysis which is helpful in analysing rare and unique resources of the
company so as to provide value to those resources and to get higher sustainability.
Furthermore in order to analysis external environment factor, PESTLE analysis is taken so
that to recognise market competencies and to use them in business in order to get high growth
and profit. (Abratt and Mingione, 2017)
TASK 1
External analysis
Industry is categorised as those business entity which are having their business at high
scale in manufacturing or trading concern. Industry is the sum of so many companies which
are doing same sort of business. As in context of Sainsbury’s, it is associated with retail
industry which occupies 43.1% market in this industry so they are known as market leader
within their industry that renders them additional benefits over their goodwill and market
share.
For the purpose of analysing external environmental analysis, PESTLE is taken which
is helpful in recognising external competencies so as to identify opportunities within each
factor. PESTLE analysis is portrayed as under:
Political factors: These factors are associated with political situation in UK which govern
the business and political stability of the country. As in context of Sainsbury’s these factors
involves governmental intervention within industry, taxation rules so as to provide growth to
the industry and business. Political situation of UK is not stable due to Brexit, it is an

agreement between England and EU which shapes that England will not be part of EU
anymore(Ayers and Odegaard, 2017). This element is having critical impact on retail industry
as UK is high on consumer debts and government debts. As if England gets separated from
EU then, Sainsbury’s will have to import their products from some other country which may
cost them high that may lessen their profitability.
Economic factors: These factors are related with inflation rate, economic growth,
and fluctuations in foreign exchange rate, unemployment rates, consumer’s purchasing power
and many more. As in current scenario UK is having high inflation rate because of Brexit
agreement which is giving adverse perception to their population. On the other hand
Sainsbury’s is wholly dependent on their transporters and due to increase in prices of petrol
and diesel it will affect in decreasing their profits(Christopher, 2016). Furthermore in current
situation prices of every commodity is increasing due to which all the products of Sainsbury’s
is increasing which will reduce demand of their products. On other side Sainsbury’s is giving
more salaries to their employees even for their store keeper as compared to their rivals such
as Tesco and Burberrry so this is rendering them comparatively low profits. Now they have
started their joint venture with ASDA so as to get larger capture over the market and to
enhance their goodwill.
Social factors: These factors are associated with taste and favourites of consumer.
Demographic conditions, age spreading and growth of population in the country. In the
background of Sainsbury’s, consumer as of now prefers organic and healthy good in order to
promote their healthy habits. Sainsbury’s is having almost variety of packaged food items so
this is threat for the company . On the other hand customer prefers one stop solutions to their
needs that means they prefer to go to a store where they can find all their needs. So in order
to deal with this situation Sainsbury’s has started to keep non-food item in their store so as to
provide convenience to their customer and to enhance their sales. On the other hand their
joint venture with ASDA has given them to acquire more customers and to meet their
expectation with the view to increase their sales and profits.
Technological factors: These factors are associated with all the innovations and new
research and development in the sector of technology for introducing technological
advancements, awareness regarding latest technology and technological automations. As in
reference of Sainsbury’s they have introduced web based services under which customer can
order food and Sainsbury’s delivers those products within very less time. As in current time

people are prone to get things at their door steps they don’t prefer to go out for their small
needs so this initiative has given maximised experience to their customer who enable the
company to earn high profits and increase their customer base. On the other hand with use of
analytical software and search engine optimisation, Sainsbury’s is trying to recognise needs
of their customer as per demographic needs due to which they recently establish their joint
venture with ASDA (Cuevas-Rodriguez, Guerrero-Villegas and Valle-Cabrera, 2016).
Furthermore AI is providing them ease to serve larger audience and to get high share in the
marketplace and industry as well. This technology is helping them to have significant market
edge and to become a company who is technology friendly.
Legal factors: These factors are associated with all the legal laws which affects the
business operations and all the governmental policies which are made for the welfare of the
business so that to give them legal identity. In context of Sainsbury’s they are required to
followed those rules and methods which are mentioned in company’s law in for the process
of joint venture (Hanaysha, 2018). It is a food company so various laws of food and safety
are required to be followed by them so as to maintain transparency about ingredient with their
customer and to protect them from any health hazards such as food poisoning etc. In the
process of remain up to date with all the legal laws which are applicable to Sainsbury’s, this
need huge cost which may diminish their profit due to which they may have to lose their
additional profits.
Environmental factors: These factors include environmental surroundings and
changes in atmospheric condition which may affect the business of the company. In the
context of Sainsbury’s they supply packaged food items which is having high consumptions
over plastic so they are imposed to adopt CSR policies so as to obey several environment
laws and to safeguard eco system by some groups. Further due to change in environmental
conditions taste and preference of customer get changed so in order to deal with this situation
Sainsbury’s is providing products as according to the needs of their customer so as to get
distinct identity in the market place and to establish competence against their rivals. This
helps them to receive competitive edge in the marketplace and to safeguard the environment
with their new products.

Industry analysis
For the purpose of analysing industry, porter’s five forces are used. Those forces are
helpful in analysing those factors which are helpful for the business to have growth within
industry and to recognise market trends and needs. Those factors are analysed as under:
Threat of substitute: This threat involves number of substitute such as Tesco, Burberry etc.
and their pertinence in the market. In the case of Sainsbury’s they have high threat of
substitute as in this industry they have high number of company which are doing same
business so this crates less market opportunity or Sainsbury’s and for differentiate themselves
from other rivals they are required to introduce some innovative products(Ioannou and
Serafeim, 2019).
Threat of entry: This threat is related to the new entry in the existing industry which is
enhancing the level of competition and to get intense competition. As in context of
Sainsbury’s this force is having low intensity, because company is required to have high
investment for entry into retail market and to start large food retail chain like Sainsbury’s. So
it is not easy for small companies to step in this industry and invest huge money in
promotional activities. On the other hand with their new joint venture with ASDA this is
giving power to Sainsbury’s in order to diminish this threat (Kang and Lee, 2016).
1) Bargaining power of buyer: This concept is associated with the level of power hold
by buyers in the industry which controls the price fluctuation by the company. In the
context of Sainsbury’s the customer or say buyer are having high power to hold their
decision over pricing. Due to presence of various substitutes the buyer is having
power to switch brand. In this case buyers are price maker and for retain their
customer Sainsbury’s is required to provide some additional monetary benefits to
their customer such as seasonal discount and bundled sale. Further their customer
cannot bear high variation in their prices as because switching cost is null and they
may switch their brand.
2) Bargaining power of suppliers: This concept is related to the buyer of a company
and level of distinctiveness and switching cost for the company if they change their
buyer. As in context of Sainsbury’s this threat is low, as they have so many supplier
and Sainsbury’s is a huge brand so they will not be facing any problem in finding new
supplier which may provide cost benefits to them as compared to earlier one.

Inside rivalry: This force is identified by intensity of rivals inside the industry and power
hold by them within their industry. As in background of Sainsbury’s, this force is having high
intensity as they have so many established rivals which already hold a good position within
their industry and high market value and coverage. On the other hand after merger with
ASDA, Sainsbury’s is able to decrease this force so as to cater more customers with their
high customer base (Kiron and et. al., 2017).
TASK 2
Organisation’s resources & unique capabilities
Some factors in the organization works as their unique resources and capabilities
which help the business in tracking their success path and to achieve their pre decided goals
and objectives in a timely and sequential manner. As in background of Sainsbury’s the
company is having so many success factors which are required to be analysed by their
management team so as to prepare action plan in implementing any strategy effectively. With
the help of these resources and capabilities the business is able to flourish and get maximum
advantages over their profitability and productiveness. These factors are explained as below:
Unique resources: Sainsbury’s is having huge unique resources which make them to
define their distinct identity in the market and to attain benefits over market by getting high
competitive edge and high profitability and market sustainability. Those factors are explained
as under:
1. Joint venture with ASDA: As Sainsbury’s is having their new joint venture with
ASDA, which is working as their unique resources as ASDA also had high brand
value and high market coverage. So after their merger they have more large market
share which leads them to make huge customer base and make high profits (Long,
Looijen and Blok, 2018).
2. High skilled employees: Sainsbury’s is having high skilled employees even in their
store they have well behaved staff which gives them customer satisfaction. They pay
comparatively high salaries to their store keeper as it is an employee centric company
and they put high emphasis on their employees. Further they think employees are the
drivers to organisational success so they enable so many employee satisfaction
measures.

3. Employee diversity: In Sainsbury’s organisation is having high employee diversity
which is making efficient internal environment for their employee. With the help of
employee diversity, employees gets motivated and they perform in an extra ordinary
manner. Employee diversity is the most useful resources for Sainsbury’s as this assist
them in having higher productivity so that to have high competitive edge.
4. Supply chain management: Sainsbury’s is having high command over their supply
chain management. They have efficient balance on their supplier which provides them
ease to cater their customer without any obstacle. With the help of effective supply
chain management, demand of their customer can be met in a considerable manner.
Unique capabilities: Unique capabilities are referred as those capacities which are
helpful for the business so as to attain their business goals and targets. Some of the
unique capabilities are explained as below:
5. CSR policies: These policies are adopted in Sainsbury’s so as to safeguard the overall
environment and their employees’ interest. In CSR practices they adopted such
methods in which they are trying to eliminate amount of wastage so that to provide
benefits to their environment (Luu, Rowley and Vo, 2019).
6. Superior position in industry: This is the most beneficiary capability of Sainsbury’s
as they are one of the best supermarket chains in UK. They have so many quality
brand in their store which help them to capture larger audience so as to get high
market sustainability. With this Sainsbury’s can establish themselves as prominent
brand in their industry and to get competitive edge in the market.
7. Web based services: Sainsbury’s is offering web based services to their customer
which enables them to deliver their perishable goods in less time so as to avail those
products for use. These services enhance their market share as they captured more
customer with this online platform.
8. IT integration: Extranet IT application used by Sainsbury’s provides them ease in
order to obtain customised information from their business partners. With the help of
this system they get high flexibility in their business due to which high competencies
can be seen in the market (Manasakis, Mitrokostas and Petrakis, 2018).
VRIO framework: VRIO is a strategically adopted tool which is used so as to used by
the companies in identification of their available resources and intrinsic capabilities so as
to get high competitive edge in the market and to compete with their rivals. In the context
of Sainsbury’s this framework is explained as under:

 Valuable: The valuable resources are to be identified by Sainsbury’s so as to
utilise them in appropriate manner and to earn high profits and market share.
The valuable resources hold by Sainsbury’s is their employees and their
supply chain management system. These resources are helpful for them in
order to establish high market value so as to get high sustainability over the
marketplace.
 Rareness: These are the resources which are rare for the company and they
add high value to the firm. As in context of Sainsbury’s the company is
having rare resources which add more market value to them. Their rare
resources are their production and manufacturing machines which are having
high standards and laced with advanced technology.
 Imitable: These are those product or services which can be imitated by other
rivals and this lead to lose market share and prevailing customer base. As in
context of Sainsbury’s, their imitable products are their food products and
delivery services. So in order to deal with this situation they are required to
introduce some innovative features in their delivery services so as to get more
coverage over the market. (Miethlich and Oldenburg, 2019)
 Organisation: This means the whole organisation under which all the
operations are performed. As in background of Sainsbury’s, they are
managing their staff and overall operations in an efficient manner so as to add
more customer value and to recognise as leader within their industry.
TASK 3
Strategy evaluation
The strategy adopted by Sainsbury’s in order to their market expansion is joint
venture, in which they choose to have joint venture with ASDA. This strategy of succession
gave them high benefit over the retail industry and to establish way to deal with their rivals
and to get distinct position in the marketplace. The critical success factors are determined in
such a way that those adopted strategy is benefiting to the environment, stakeholder and
feasibility of that strategy. The impact of joint venture on stakeholder and environment is
explained as under:

Suitability to environment: This strategy of joint venture is adaptable for the
environment as Sainsbury’s and ASDA both are following environmental policies which are
helpful in safe guarding the eco system. Both the companies are having CSR policies which
are adopted in order to lessen the bad effects for the environment (Shankar, Gupta and
Pathak, 2018)
. Suitability for stakeholder: Stakeholders includes employees, government,
shareholders, customers and all those parties which are affecting the operations of the
company. As in context of Sainsbury’s this joint venture is providing benefits to their
employees as they get more opportunities to expose themselves. This strategy is
advantageous for government as Sainsbury’s is going to pay more tax by which government
will get high revenues. Further for their customer, Sainsbury’s is keeping high range of
customer so as to meet their daily needs and to maintain their market value.
CONCLUSION
From the above detailed report it can be concluded that corporate strategy is
accommodating the business in gathering all the relevant information so as to utilise all the
resources in an effective manner. With the help of porter model it is easy for the business to
get market opportunities and growth option. With the help of PESTLE, the business is able to
identify those external factors which may impact the business operations. On the other hand
VRIO framework is useful so that to categorise available resources so as to prioritise them as
per the usage (Wadström, 2019). At last success factors are analysed so as to get to know
about feasibility of the business so as to recognise sustainability.

REFERENCES
Books and journals
Abratt, R. and Mingione, M., 2017. Corporate identity, strategy and change. Journal of Brand
Management. 24(2). pp.129-139.
Ayers, J.B. and Odegaard, M.A., 2017. Retail supply chain management. CRC Press.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Cuevas-Rodriguez, G., Guerrero-Villegas, J. and Valle-Cabrera, R., 2016. Corporate
governance changes, firm strategy and compensation mechanisms in a privatization
context. Journal of Organizational Change Management.
Hanaysha, J.R., 2018. Customer retention and the mediating role of perceived value in retail
industry. World Journal of Entrepreneurship, Management and Sustainable
Development.
Ioannou, I. and Serafeim, G., 2019. Corporate sustainability: A strategy?. Harvard Business
School Accounting & Management Unit Working Paper, (19-065).
Kang, S.W. and Lee, K.H., 2016. Mainstreaming corporate environmental strategy in
management research. Benchmarking: An International Journal.
Kiron and et. al., 2017. Corporate sustainability at a crossroads. MIT Sloan Management
Review. 58(4).
Long, T.B., Looijen, A. and Blok, V., 2018. Critical success factors for the transition to
business models for sustainability in the food and beverage industry in the
Netherlands. Journal of cleaner production, 175, pp.82-95.
Luu, T.T., Rowley, C. and Vo, T.T., 2019. Addressing employee diversity to foster their
work engagement. Journal of Business Research, 95, pp.303-315.
Manasakis, C., Mitrokostas, E. and Petrakis, E., 2018. Strategic corporate social
responsibility by a multinational firm. Review of International Economics. 26(3).
pp.709-720.
Miethlich, B. and Oldenburg, A.G., 2019. The Employment of Persons with Disabilities as a
Strategic Asset: A Resource-Based-View using the Value-Rarity-Imitability-
Organization (VRIO) Framework.
Picoto, W.N. and Henriques, R.F., 2018. Continente online: Building a success story in the
food retail business. SAGE Publications: SAGE Business Cases Originals.
Shankar, R., Gupta, R. and Pathak, D.K., 2018. Modeling critical success factors of
traceability for food logistics system. Transportation Research Part E: Logistics and
Transportation Review, 119, pp.205-222.
Wadström, P., 2019. Aligning corporate and business strategy: managing the
balance. Journal of Business Strategy.