Sainsbury Strategic Management: Analysis, Issues & Global Ideas

This report provides a strategic management analysis of Sainsbury, a major UK supermarket chain. It examines the organization's external environment using PESTLE and Porter's Five Forces models, assessing social, economic, political, environmental, technological, and legal factors, as well as the threats of new entrants, substitute products, competitive rivalry, buyer power, and supplier power. The internal environment is analyzed through a value chain analysis, focusing on inbound logistics, operations, outbound logistics, infrastructure, technology development, and human resource management. A SWOT analysis identifies Sainsbury's strengths, weaknesses, opportunities, and threats. The report also touches upon segmentation, targeting, and positioning strategies, current issues faced by the company, and the application of global strategic thinking, including Bowman's Strategy Clock. The report concludes with recommendations for Sainsbury to enhance its strategic position. Desklib offers a wealth of similar solved assignments and past papers for students.

STRATEGIC MANAGEMENT

Table of Contents
INTRODUCTION................................................................................................................................2
ANALYSIS OF THE ORGANIZATION AND ITS BUSINESS ENVIRONMENT..........................................3
EXTERNAL ANALYSIS........................................................................................................................3
PESTLE ANALYSIS.........................................................................................................................3
PORTERS FIVE FORCES MODEL....................................................................................................5
INTERNAL ANALYSYIS.......................................................................................................................7
VALUE CHAIN ANALYSIS...............................................................................................................7
SWOT ANALYSIS.............................................................................................................................10
COMPARING THE THEORY AND THE PRACTICES...........................................................................11
SEGMENTATION, TARGETING AND POSITIONING.....................................................................12
CURRENT ISSUES IN THE COMPANY..............................................................................................13
UNDERSTANDING OF GLOBAL STRATEGIC THINKING AND APPLICATION OF THE STRATEGIC
IDEAS..............................................................................................................................................14
BOWMAN STRATEGY CLOCK.....................................................................................................14
CONCLUSION.................................................................................................................................15
RECOMMENDATIONS....................................................................................................................15
REFERENCES...................................................................................................................................16
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INTRODUCTION
A field of the management that focuses majorly on the long-term planning and providing
directions to the organization is referred as the strategic management. Wirth the help of the
strategic management the things do not happen randomly in the organization but occur with
the pre-planned activities and long-term goals of the organization (Hill, et al. 2014).There are
different strategic management phases like the formulation, planning, implementation and the
control of the strategy. This report has been based on the case study of the Sainsbury a UK
based organization and is from one of the largest supermarket chains. The Sainsbury is present
in various cities of the UK with more than 21 million customers around the world and possesses
1, 81, 910 employees. The company has more than 2000 suppliers (Sainsbury, 2017). The
present revenue of the organization is around £26.224 billion.
The internal and the external business environment of the Sainsbury organization has been
analysed in this report for the formation of the strategic management. The international
thinking of the company has been described along with the application of the various strategic
ideas.
2

ANALYSIS OF THE ORGANIZATION AND ITS BUSINESS ENVIRONMENT
EXTERNAL ANALYSIS
The company that stands at the second position terms of the largest chain of the supermarket
is the Sainsbury with approximately 16.9% share in the supermarkets of the UK. The
organization was established in the year 1869 with its headquarters in London, UK. The
company has been known for providing the best quality of food material to the people for
maintaining their health. The company has been seeking to competitive advantage in the
market with the help of the different smart strategies (Grant, 2016). This strategic management
helps to attain the goals of the organization. Several external factors are present in the
organization that has been affecting its operations and functions and might face different
situations. With the help of the strategic development, the 20-20 business policy of the
organization has been affected by its guidance to the value framework.
PESTLE ANALYSIS
SOCIAL SITUATION
Sainsbury has adopted the strategy of placing all the different varieties of products
under the one roof which is majorly preferred by the customers. The domestic meal
making by the supermarket has been declined due to the various social factors like the
longevity in the population, increasing female workforce in the organization and the
expectations of the customers (Wheelen, et al. 2017). The Sainsbury has adopted the
business strategy of "Cook and Save" in which the products that can be easily coked are
offered to the customers. Many CSR activities have been supported by the company to
raise the charity funds and provide equal opportunity to all.
ECONOMIC SITUATION
The different economic factors like the prices, profitability, demand and the costs are
highly affecting the strategic management of the Sainsbury. It has also been affected by
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the changing interest rates, increasing inflation of the food prices, GDP, increasing
employment and the stock market. The business strategy of the company has been
affected and its demands of the products will also decrease due to the increasing
unemployment and the high prices (Sadgrove, 2016). Sainsbury must pan to enter the
new market in order to manage the various risks and the economic slowdown.
POLITICAL SITUATION
The high amount can be saved by the Sainsbury organization due it the imposition of the
various policies by the UK government regarding the corporate tax reductions. It has
been noticed that the sales of the company have been reduced by 0.6 % during the last
three months and their profits have been lowered as compared to that it was during the
first quarter of the year 2017. Great pressure has been experienced by the business
conditions due to the changing attitude of the customers. The debts of the government
along with the consumer debts are high which is affecting the business but this can be
resolved by the payment of the small amount of taxes to UK government (Paul, et al.
2014). With the help of the strategic management, the Sainsbury can enter into the new
markets of Europe and can increase its sales.
ENVIRONMENTAL SITUATION
Sainsbury has been adopting the different strategies to prevent the environment they
seek for the conservation of the energy by reducing the impact of their retail stores by
the usage of the CFL lights and the solar energy. The operation of the carbon footprints
is also minimised along with the various initiatives to reduce the waste by the reducer,
reuse and the recycling approach (B2U, 2016).
TECHNOLOGICAL SITUATION
The growing demands of the products of the organization have been met by the
technological advancements and the adoption of the business strategy to make use of
the online and web platforms to sell their products. The sales of the organization have
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been increasing by 25% year b year due to their online services in almost 88% of the
UK's households. Their information about the products has been linked to the ERP
systems for the easy data management (Hillson and Murray-Webster, 2017).
LEGAL SITUATION
The company needs to follow the strict laws and regulations regarding the packaging
and labelling of the food products so as to avoid the negative effect on the business
strategies and policies. The company has adopted the new tax policies of advertising the
fatty products and have changed their products accordingly (Aithal et al. 2016).
Figure 1: PESTLE ANALYSIS
[Source:https://www.business-to-you.com/scanning-the-environment-pestel-analysis/]
PORTERS FIVE FORCES MODEL
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THREAT OF THE SUBSTITUTE PRODUCTS- The threat in case of the substitutes of the
products of food retail industry is very less because in the emerging market it is seen as
a necessity by the customers. Sainsbury always aims at enhancing the shopping
experience of the customers by the use of the various innovative products to meet the
changing demands of the customers which makes it hard for others to replace them
(Yunna and Yisheng, 2014).
THREAT OF THE NEW ENTRANTS- Sainsbury uses to face the threats of the new entrants
as they use to come up with the different innovative products which result in the
reduced price of the products (Zhao, et al. 2016). But various barriers are faced by new
businesses to establish in the market. Effective barriers must be built up by the
Sainsbury to avoid the new entrant’s threats and to attain a competitive advantage.
These threats are low as it requires a high time to establish well in the market and gain a
good brand image whereas Sainsbury has been operating its business from the ages in
the UK's market (Ovidijus, 2013).
COMPETITORS RIVARLY-Various competitors are trying to enter the market of the food
industry that poses a threat of competition to the Sainsbury. The Ada, Tesco and the
Morrison's are the other large supermarkets that are giving high competition to the
Sainsbury. But the Sainsbury has been dealing with the wide range of products which
gives it a competitive advantage over the other (Harding, 2017).
BUYER’s POWER- Various sellers are present in the markets that are selling the same
products and goods due to which the buying power of the buyers becomes high. There
is a threat for Sainsbury to lose their customers as the cost of switching for the
customers seems to be very low (Dälken, F., 2014). The buyer power of the company’s
customers has also been increased due to the recession in the economic system.
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SUPPLIERS POWER- The suppliers of the Sainsbury are the big companies like the
Cadbury, Unilever, P&A etc. and the Sainsbury has a dependent relationship with these
providers. If the merchandises are not sold by the supermarket then the customers will
switch to some other competitor that increases the power of the suppliers. The
bargaining power of the suppliers largely affected the revenues of the Sainsbury
(Harding, 2017).
Figure 2: Porter’s Five Forces
[Source:https://www.strategicmanagementinsight.com/tools/porters-five-forces.html]
INTERNAL ANALYSYIS
VALUE CHAIN ANALYSIS
There are different activities that are taking place in a business organization which are directly
related with the company to attain a competitive advantage in the market is expressed inside
the value chain analysis (Gereffi. and Fernandez-Stark, 2016). These activities add particular
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value to the each of the business products and services. It is one of the most powerful tools
that can be utilised by the Sainsbury for the strategic planning and management while
minimizing the cost and increasing the value. It includes-
Figure 3: Value chain analysis
[Source: https://www.businessnewsdaily.com/5678-value-chain-analysis.html]
PRIMARY ACTIVITIES
INBOUND LOGISTICS- Sainsbury has strong relationships with their suppliers who
provide different types of commodities to the organization and hence they do not
manufacture goods themselves and maintains the products in stocks as per the
demands and avoid facing the stock out situation. The strategic focus of the
management is to save the cost of the products by purchasing the products in bulk
whose demand is quite high by the customers in the market (Mudambi and Puck2016.).
The company is looking to attain sustainability in the operational actions of the strategic
management and the focus to improve the inbound activities which will enhance their
relationships with their suppliers.
OPERATIONS- Sainsbury differs in their operational features as the production do not
take place in the organization. The CO2 discharge has been cut down by the
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transportation operation performed by the company and their operations include a
collection of the goods from the different providers and then deliver them to the
different stores in the UK. More customers are attracted by the enhanced quality of
products of the company designed by the effective strategies (MacDonald, 2016).
OUTBOUND LOGISTICS- There are various warehouses of the Sainsbury with the help of
which they operate on the large basis which helps in the proper management of the
goods and services that are being delivered to their physical stores when orders are
being received by them (Kayla, 2017).
SUPPORT ACTIVITIES
INFRASTRUCTURE- There are different, different, management layers include in the
infrastructure of the company like the quality management and the accounting
department that helps to attain a competitive advantage to the organization by the
development of the quality products through quality assurance systems. For the
remuneration and the appointments, the company has a separate committee along with
the internal audit team to seek the risk assessment procedures and handle other
financial affairs (Hishe, et al. 2016).
TECHNOLOGY DEVELOPMENT- The success of the Sainsbury can be defined from the
technological developments and innovations which are required to maintain the
leadership position in the market. The job processes and the production of the company
have been improved due to the improvised technology. Different innovation in the
company's products and delivery are been brought due to the enhanced knowledge of
the technological developments (da Silva Guabiroba et al. 2017).
HUMAN RESOURCE MANAGEMENT- The different stage like the recruitment, selection
of the people, motivating the team and providing them training is looked after by the
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human resource management of the Sainsbury which contributes a major part in the
success of the organization. A talented team is recruited by the HR department and
according to the job and the skill analysis right employees are chosen for a particular
function. Different extrinsic and the intrinsic rewards are offered to the employees to
raise their motivation level (MacDonald, 2016).
SWOT ANALYSIS
STRENGTHS WEAKNESSES
 Second largest supermarket in the UK
 Large number of employee with
strength of around 1, 81, 910
 High experienced team members
 More than 500 supermarket and
more than 350 stores in the UK
(Leiber, et al. 2018)
 30,00 lines of stock in each store out
of which own label goods are 20%
 High share in the markets due to
excellent promotions and
advertisements
 Increase in the prices of the food
products in the world led to the
increased selling price of the
Sainsbury items
 Declining profits rates
 High competition in almost every
segment in the industry
 Limited operations and business
growth (Jaber, et al. 2015)
 Some technical issues
OPPORTUNITIES THREATS
 With the help of the partnership and
joint ventures opportunities of
entering in the markets of the new
companies (Bohari, et al. 2017)
 The sales of the company can be
boosted from the opening of the self-
 Threats from the competitors like the
Morison’s’ TESCO and the ASDA and
other new entrants
 Selling of the products at higher costs
due to the increasing price of the
food products
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checkout machines that can be
operated 24 hours
 Opportunity to expand in the
markets of the Asia and Africa
 Challenges due to increased
globalisation
 Have to seek the best quality and
financially visible products
Figure 4: SWOT Analysis
[Source: https://www.competitivefutures.com/data-lab/]
COMPARING THE THEORY AND THE PRACTICES
In order to develop strategic management in the Sainsbury organization, they need to revamp
their marketing mix by the segmentation, targeting and the positioning-
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SEGMENTATION, TARGETING AND POSITIONING
SEGMENTATION- Sainsbury aims at capturing the market by providing the best value for
money. In order to enhance the market sustainability of the organization, the Sainsbury needs
to use their current geographical locations. Geographical segmentation approach is used to
focus on the specific needs by the concentration on the buyers. With the help of the
segmentation, a bespoke formula can be developed that will increase the market position of
the company (Schlegelmilch, 2016).
TARGETING- Targeted tiers in link with the products of the supermarket must be developed by
the Sainsbury must be developed to focus majorly on the targeted market that will be value
conscious along with the quality. The company must focus on the development of wide
targeted audience with the help of the refurbishment of the products and should link them,
directly with the verities of products offered (Pyo., 2015).
POSITIONING- Sainsbury has placed themselves in the mid-tier of the market. According to the
audit from the pricing point of view, they must be able to compete well with the lower ends of
the market. The pricing of the product of the company varies from high to low that creates
value for their customers (Schlegelmilch, 2016).
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CURRENT ISSUES IN THE COMPANY
Few of the major challenges faced by the Sainsbury are depicted below-
 The company is facing the challenge of the increasing prices of the food products
around the world due to which they are forced to increase the selling price of their
products which gives the competitors an competitive advantage by selling products at
lower prices
 In the initial days, Sainsbury faced the challenges to maintaining a work standard as
demanded by the sustainable agriculture to support the farmers of Britain (Tai, et al.
2014)
 Increased economic uncertainty by the organization after the impact of Brexit which
reduced the sales of the products due to the increased pricing
 The problem in the adoption of the digital technology transformation to effectively sell
their products through online sources, market them through social media and offer
digital payments to the customers (Tai, et al. 2014)
 Increasing competition in the market by the new entrants and food deflation which has
increased the cost of the wages and reduced the sales value. This has lowered the
profits of the Sainsbury
 As lower pages are offered to the employees the comply has been facing the issue of the
employee turnover
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UNDERSTANDING OF GLOBAL STRATEGIC THINKING AND APPLICATION
OF THE STRATEGIC IDEAS
Sainsbury can adopt the strategies as per the Bowman strategy clock which can also help in the
competitive analysis of the business as compared to the other competitors-
BOWMAN STRATEGY CLOCK
In the Bowman strategy clock firstly the competitor analysis of the organization is done in which
the key competitors are being identified, accessed and being selected. While during the second
stage a competitive marketing strategy has been developed that helps to the organization to
strongly compete against the other competitors. It can be done with the help of the following
options-
HIGH PRICE- Sainsbury focuses more towards their pricing rather than the customers as it is a
very old brand so the prices of the products are high. The cost leadership is applied by the
organization and hence they have high pricing and high value of the products. The company has
the potential customers than others due to high-quality products (Tassabehji, 2014).
DIFFERENTIATOR- The main objective of the Sainsbury is to keep the high prices of the products
offered to the customers with extra value because the brand value and the image of the
organization have been associated with it.
The competitors of the Sainsbury are much more focused toward the cost differentiation while
controlling the prices but the Sainsbury is more focused on the prices rather than the prices.
The company acts as cost differentiator as the brand image of the company as compared to the
other competitors is high and have more loyal customers. The company should focus on the
expansion of the international market and increase in the foreign trading of the products to get
back their position in the market and develop themselves in the emerging markets
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(Haselwanter, et al. 2016). The company needs to enhance their customer service to offer the
unique services to their customers to attract them more towards the company. The products of
the company must also be enhanced in order to develop more in the retail industry.
CONCLUSION
The marketing position of the Sainsbury is in a good condition in case of the retail industry due
to the proper strategic management in the organization. With the help of the SWOT analysis
done in this report, it has been realised that the company has been facing some of the threats
and the issues which can be resolved by the utilisation of the some of the theories and
concepts. Several strategies are suggested in this report for the Sainsbury to deal with the
emerging market challenges which will further enhance the growth of the company. The
company has a high brand image in the market that needs to be maintained to retain the
potential customers.
RECOMMENDATIONS
Sainsbury has effective products and services but they lack good laptops in their supermarkets
so it is recommended that the company must buy effective laptops to increase the sales and
productivity. Innovative business activities must be introduced by the company like some
effective offers on the products so as to impress the customers and the stakeholders. The
company must try to emerge in the new market to increase their market value with the help of
the strategic management and introduce some new products in the market. 24*7 facilities must
be provided to reach the topmost position. The company needs to focus more on the
customers rather than increasing the prices of the products so that the customers will be
favoured. The prices should be kept lowered to gain a competitive advantage over the
competitors. The company can offer a diversified range of products or just specialize what they
are good at.
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