Strategic Report: Sainsbury's Analysis and Merger Strategy

This strategic report provides a comprehensive analysis of Sainsbury's, focusing on its business environment and proposed merger with Asda. The report begins with an introduction to the current business landscape and the need for strategic adaptations, particularly in the face of uncertainties and competitive pressures. The first section presents an external analysis of the retail/grocery sector, discussing market opportunities and challenges, particularly in the context of the proposed Sainsbury's-Asda merger. This includes a detailed PESTLE analysis of political, economic, social, technological, legal, and environmental factors influencing the supermarket's operations. The report then delves into industry analysis using Porter's Five Forces to assess the competitive landscape. Following the external analysis, the report moves on to an internal analysis, likely employing tools like VRIO analysis to evaluate Sainsbury's internal resources and capabilities. Finally, the report concludes with a strategy evaluation, likely discussing the implications of the merger and potential future strategic directions for Sainsbury's. The report also highlights the impact of the Competition and Market Authority's concerns on the merger, emphasizing the importance of customer impact in strategic decision-making.

Strategic Report

Table of Contents
INTRODUCTION...............................................................................................................3
Q1. External analysis...........................................................................................................3
Discussion of the business environment and identification of a number of Opportunities. 3
PESTLE Analysis:..........................................................................................................4
Industry analysis (5 Forces)............................................................................................6
Porter Five Forces Analysis:...........................................................................................6
Q2. Internal analysis............................................................................................................8
VRIO ANALYSIS..........................................................................................................8
Q3. Strategy Evaluation.......................................................................................................9
CONCLUSION..................................................................................................................10
REFERENCES..................................................................................................................11

INTRODUCTION
In modern time, business environment is carrying ample number of uncertainties,
and it is required for organisations to keep their focus on offering customers an aim of fulfilling
their needs and requirements. This can be done through a range of business strategies that could
help firms in enhancing their profit margins (Bansal and Song, 2017). For an example, a
company has reached to a no loss and no gain situation, over here it will be required for the
organisation to examine the environment, identify best possible opportunities and select the
fruitful strategy in order to overcome all the issues and gain competitive advantages. In this
context, a case of Sainsbury's where company has proposed to get merged with ASDA using
merger acquisition as its strategy for growing their business faster (Proposed Sainsbury’s and
Asda merger. 2018). This report is going to present external analysis, internal analysis of the
business company and lastly, assignment is going to cover the strategy evaluation of Sainsbury's
which will required to be adopted by them in future when will merge with Asda.
Q1. External analysis
Discussion of the business environment and identification of a number of Opportunities
An external analysis is basically being done to analyse the situation of industry in
which organisation is performing and it is also aid in looking business environment to a wider
context. In this context, external analysis is going to be done of retail/grocery business sector, in
which Sainsbury's is performing its operations. The report discusses about Sainsbury's strategy
when they will merge Asda. It has been analysed that Sainsbury's UK's top leading supermarket
that offer huge variety of products to its customers. Sainsbury's holds second position in overall
retail industry whereas at same time Asda captures third position at same market in same
industry. By observing each other's command on retail industry both the companies have decided

to get merged so that they can capture maximum customers and increase their market share with
the support pool of resources of each other (Bansal and Song, 2017). Along with this, it also help
both the company becoming leading company in retail industry by defeating TESCO with the
collaboration. But, it has been seen that this merger is yet not executed due to stake made by
Competition and Market Authority. This authority have declared that if this merger will be
executed then it will affect customers a lot. This is because, merger of these two companies will
increase prices of products in retail industry which will directly influence competitors to raise
their prices as well. As a retail, this whole situation will affects customers at highest level.
Therefore, the merger of both the companies that is Sainsbury's and Asda is still on hold
(Brewster, 2017). By analysing overall situation, Sainsbury's manager has conducted an
investigation for assessing external market in order to find out available opportunities and issue
at marketplace. In this regard. PESTLE analysis has been conducted for analysing whole
business environment in order to understand its influence over Supermarket. All of the main
factor included in this framework are described as below:
PESTLE Analysis:
Political Factor – This factor is mainly related to various governmental
legislations like tax policies, entry and exit legislations, political stability of the nation etc. With
reference to Supermarket in retail industry, it can be bring opportunity as well as threat for the
supermarket which are described as below:
Opportunity: Political condition of UK is highly strong as the nation is already
developed. This brings opportunity for supermarket's located in UK as they are aware about
existing policies of the UK which makes it easier for them to execute their business activities in
right manner.

Threat: At the same time, the also has main threat related to chances of political
war, international war or kind of terrorist attack among UK and its associated countries. In order
to overcome this situation Supermarket's can maintain level of their raw material for fulfilling
requirement of customers in this kind of situation.
Economical Factor – It is consist of various factors such as economic situation of
country, growth rate, recession, inflation rate, interest rate, credit accessibility etc.
Opportunity: UK owes strong economical background as it has highly talented
and skilled employees. Along with this, infrastructural facility of this country is also good. This
brings opportunity for Supermarkets as they can easily deliver best possible products to
customers with the usage of manpower (Bell, Bryman and Harley, 2018). This will also raise
satisfaction level of customers in United Kingdom.
Threat: Recession has been seen as the main threat for Supermarkets as it would
be difficult for them to handle with fluctuation in prices as per requirement of people. For
handling this situation, Supermarkets are required to minimise their prices of their products in
order to influence customers interest towards them even when their prices are low.
Social Factor – Social factor is associated with wants, lifestyle, living pattern of
people, needs etc. which directly places impact over demand of particular product at
marketplace.
Opportunity: Customer zone of UK is very friendly and easily accepts new
product offered by the supermarket at market. This can be seen as the opportunity for
Supermarkets as they can conduct effective market research so that they can identify different
expectations of customers (Cavusgil, and et. al., 2014). As a result they will be able to influence
customers to buy their offering in UK.

Threat: The major threat which could be faced by Supermarkets in UK is related
to more trendy offering of similar kind of products by competitors at low prices.
Technological Factor – It is considered as the fluctuation in that takes place in
existing technology and systems which is being used within the Supermarkets.
Opportunity: United Kingdom is a technically developed country which seems to look
like opportunity for this Supermarkets as they can easily use new technology in United Kingdom
which contributes in growing their business in effective manner. High use of technology helps
them in increasing its sales performance as well in effective manner.
Threat: On the other hand, if in case competitor companies will adopt any new
technology this will become major threat for Supermarkets existing in UK as it will directly
force the companies owning supermarket to use similar technology in order to maintain
sustainability at marketplace.
Legal Factor – Legal factor is consist of various kind of laws which required to
be followed by Supermarkets at the time of performing their business activities effectively at
marketplace. It includes health and safety law, patents violation, employment act, legislation
related to import and export etc.
Opportunity: Supermarkets of UK follows each and every legal activity which
keeps them away from illegal activity. Along with this, it also improves their brand name among
government as well as customers in positive manner (Du, and et. al., 2013).
Threat: In past, name of popular supermarket of UK that is Sainsbury's was
involved in over packaging practice which have became threat for this company as their brand
name has been spoiled in negative manner (Sainsbury's taken to court over excess packaging,
2019).

Environmental Factor – This factor clearly depicts organisation's attitude towards
the environment in terms of energy consumption, water disposal etc. It has been analysed that
customers are now giving preference to those company who places their efforts towards securing
environment.
Opportunity: In order to develop its image among customers leading
supermarkets such as Sainsbury's has introduced 20 by 20 sustainability plan with the investment
of £1 billion (Setting sustainable sourcing standards, 2019). It has been analysed that this plan
includes 20 sustainability standards which will going to be followed by organisation in order to
conserve environment (Sainsbury's launches 20 by 20 sustainability plan, 2019).
Threat: It can be said if Sainsbury's have skipped to follow this norms then it will
definitely ruin its name at marketplace as well as among consumers.
Industry analysis (5 Forces)
Porter Five Forces Analysis:
Porter Five Forces Analysis is being considered as a strategic management tool,
that helps in understanding or to analyse a particular perspective. This model was basically
proposed by Michael Porter, to analyse the industry's attractiveness and likely profitability in
1979. In present context, manager of popular supermarket has utilised Porter Five Forces in order
to understand how the five competitive forces basically impacted upon profitability and
development of supermarket if they will merge in future. It is presented underneath :
Threat of New Entrants(Low) : For Supermarkets , threat of new entrant is
relatively low in retail industry as the industry is already having market leaders who lead it
effectively. It can be said that if any new Supermarkets enters into this market they will
definably require huge amount of funds for giving stiff competition to existing Supermarkets.

But, while looking at the actual situation popular supermarkets that is Sainsbury's is UK's 2nd
largest retail Supermarket therefore, it can be said that the company does not require to worry
about new entrants as no matters what so ever company enters into the market it would be
difficult for them to give stiff competition to Sainsbury's in UK.
Bargaining Power of Suppliers(Low): Bargaining power of supplier is low for
large scale companies dealing in retail industry. There are huge of supplier available in the
industry who concentrates on grabbing attention of the large Supermarket companies so that big
contract can be gained by them effectively (Gnan, Montemerlo and Huse, 2015). This contracts
gives them business for whole year. By considering this situation, it can be said that suppliers of
Supermarkets owe less bargaining power in United Kingdom because they thinks that if they will
not agree on quotation given by Supermarkets then this Supermarket would definitely switch to
other suppliers who agrees for the same quotation at single attempt. By observing this situation,
every supplier is gets agrees to follow quotation or rates for maintaining their sustainability in
UK for longer period of time.
Bargaining Power of Buyers(High) : It is being found that, buyers mainly carries
changing mindset which develops an urge in them to be much more demanding in regards to
products and services. With reference to Supermarkets, bargaining power of buyer is relatively
high. This is because, there are numerous of supermarket available in United Kingdom who
offers similar product their respective store. Thus, if Supermarkets will not satisfy customers in
terms of prices as well as quality then there are probable chances that customers might switch to
other companies (Goffee and Scase, 2015)). Therefore, it is essential for Supermarkets to
consider purchasing power of customers in order to attract them with their affordable products

with high quality in comparison of their competitors. This is contributing in enhancing
sustainability of the Supermarkets at market place.
Threat from Substitute Products(High): Threat of substitute products is high for
Supermarkets in UK market. It has been seen that there are numerous of companies belonging to
same industry emphasis on discovering new product which can alter offering of rival
Supermarkets. These efforts are basically placed for gaining competitive advantage by attracting
maximum number of customers towards their products and services. With reference to
Supermarkets, it is essential for companies belonging to supermarket zone to conduct an
effective market research in order to understand demand and requirement of customers so that
they can develop a new product at their own level. This initiative of Supermarkets will directly
influences customers towards them which will lso enhance their sustainability in the same
industry.
Rivalry among the existing players(High): Retail industry is highly dense in
size,. This is because there are huge number of companies working in this industry. This clear
depicts that competition within the industry is very high. Therefore, in order to enhance its own
market share it is essential for Supermarkets to collaborate with their competitor so that they can
use each others resource in effective manner and attract maximum number of customers towards
them effectively (Habbash, 2017). As a result, it can be said that with support of competitor
company in supermarkets like Asda, Sainsbury's can increase its market share and could also
grab number one position in retail industry.
Q2. Internal analysis
This is important for every business organisation like Sainsbury's assist their
existing competences as well as resources in order to find out that what are different resources

required by them to get modified. These efforts of company will help them in gaining
competitive advantages. With reference to Sainsbury's, the manager of this company have used
VRIO in order to improve their knowledge on key competencies and resources of the company.
VRIO analysis is described as below effectively with relation to Sainsbury's.
VRIO ANALYSIS
VRIO is considered as strategic tool which helps company in assisting their
existing resources for gaining competitive edge at marketplace.
Valuable
It is seen as that specific component which provides value to the company and
helps them in attaining their goals and objectives within the provided time frame (Jones, and
Comfort, 2018). In context of Sainsbury's, element comes under valuable are described as below:
Strong brand image: Sainsbury's owes strong brand image at market place that
helps them in providing level of satisfaction to its customers with their offerings.
Offerings: The company provides huge variety of products to its customers with
high quality. Maximum products of this Sainsbury's are developed according to the needs and
requirement of customers so that competitive advantages can be gained by them.
Personnel: Sainsbury's also owes high skilled employees who are able to execute
all business related activities effectively which contributes in attaining competitive advantage.
Rarity
It is seen as those components which separates them from their competitors. It
can be said that if company wants to gain competitive advantages then they are required to place
some extra ordinary efforts (Kaul, 2017). Some of the main rare elements of Sainsbury's are
described as below in detailed manner.

Offerings: Products of Sainsbury's are seen as the rare because they are
formulated with the help of completely new tool and technologies. Adoption of new technologies
makes it difficult for others to copy offering of Sainsbury's.
Personnel: Regular based training and development session for existing
employees updates them at about new technology and skills. As a result, this becomes rare part
of the stated company as these updated employees are able to work in more effective manner.
Inimitable
Every organisation has some resources which can not be imitated by the
competitor companies (McCahery, Sautner and Starks, 2016). With reference to Sainsbury's one
main imitable resource of this company are described as below:
Personnel: Regular based training sessions have developed positive relationship
between employee and company as they believes that company is providing them higher
opportunity so that they can grow effectively. This training also helps staff in dealing difficult
situation. It can be said that this strong relationship with customers will become main reason
because of which they becomes imitable for Sainsbury's.
Organized
These are the resources that need to be organised in an effective manner so that
corporation can achieved its goals with in stipulated period of time. Organised factors of
Sainsbury's are given beneath.
Personnel: The staff of the respective organisation is organised in such a manner
that they are able to deal with the complex situation arising in the business environment
pertaining to Sainsbury's.

Value Chain Analysis of Sainsbury's
Q3. Strategy Evaluation
From the past few years, Sainsbury’s is the company which is quite popular
among the customers as they provide high quality products and services, in order to meet the
requirements of individuals and maintain a competitive position at the marketplace. Present
company wants to expand their business functions and for this they adopt merger strategy with
ASDA. With the aid of this, they gain high market share as well as become one of the biggest
company in retail industry (Millstein, Odoner and Sharma, 2018). In this context, Sainsbury’s
management team bring out SAFe analysis on the strategy of merger which are as follows:-
Suitability: Retail market is highly competitive and have high level of threat for
the company in order to maintain the sustainability as well as position of Sainsbury’s. With
reference to the current scenario, it has been analysed that merger strategy of Sainsbury's seems