Sainsbury's Business Performance: A Comprehensive Report

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Report and Personal Reflection
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Table of Contents
Part 1 Report....................................................................................................................................3
Introduction......................................................................................................................................3
Overview of the performance of Sainsbury.....................................................................................4
PESTLE analysis of Sainsbury........................................................................................................5
SWOT analysis................................................................................................................................7
Porter’s five forces analysis.............................................................................................................8
Key challenges faced by the company.............................................................................................9
Conclusion and Recommendations................................................................................................10
References......................................................................................................................................11
Part 2 Personal Reflection.............................................................................................................13
Introduction....................................................................................................................................13
Reflection.......................................................................................................................................13
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Part 1 Report
Introduction
This report is prepared in order to understand the impact or influence of the external environment
factors on the business. The company selected for such purpose is Sainsbury which is the second
largest supermarket chain in the UK. The company has covered the market share of 15.3% of
supermarket chains operating in the UK. The main competitor of such company is Tesco
supermarket operating in the market of United Kingdom. Along with the Asda and Morrison, it
makes up the Big Four oligopoly of UK. The customer profile of Sainsbury is also similar to
Tesco as these are both positioned as the wide range of superstores with the strong non- food
offers.
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Overview of the performance of Sainsbury
The company Argos had several problems and the logic of taking over Argos for £1.4bn is
completely unclear. There was a time when the performance of the company in the retailing of
food was less than stellar due to several numbers of the factors. There was also presented the
argument that the deal with the Argos will be diverting the management of time where there will
be the need. It has been identified that the company Sainsbury is better positioned than the
company Asda in terms of competition with two discounters Lidl and Aldi (Sorrentino, et. al.,
2018).
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PESTLE analysis of Sainsbury
It has been identified that the internal, as well as external, both business environments, have an
impact on the UK grocery retail industry. The macro environment of a business is consisting of
several numbers of factors which have a direct influence over the performance of a business.
Following is presented the macro environment analysis in order to understand the influence of
these external factors on the performance of Sainsbury:
Political Factors
Britain has voted to leave the European Union, which has caused the economic as well as
political uncertainty and upheaval for the businesses operating in the UK. This Brexit has caused
to the high inflation rates, devaluation of the currency along with the wage growth depression.
This political action has caused to decline in consumer spending which has a negative impact on
the sales of the supermarket.
Economic Factors
Due to Brexit, the pound sterling has lost its value and the takeover made by Sainsbury of Argos
is also giving it the financial constraints. Due to the high inflation rates, the households have
altered their habits of spending on shopping which have caused a big loss for the supermarkets.
The margin of profit of Salisbury is going down which is leading to an economic problem for
such a company (Wilshaw, 2018).
Social Factors
The UK grocery industry is being impacted due to such economic constraints and the shopping
habit of the local people has also changed drastically. It has been estimated that there will be a
fall in the spending in the hypermarkets as well as supermarkets from £73.7bn to £70.8bn in the
next five years. There is a negative social influence on the supermarket chain Sainsbury (Riches,
et. al., 2019).
Technological Factors
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The company Sainsbury has not been left out from the trend of adopting the digital revolution
and operating their business online. There are several services offered by Sainsbury online such
as Click and collect services as well as online food shopping. There is seen the increment in the
rates of sales after bringing the online business activities.
Environmental Factors
There is a continuous rise in the ethical as well as environmentally conscious customers who
demand continuously from the firms to use the recycled materials and the paper packaging.
There is started the opening of zero waste supermarkets in the UK which is creating huge
competition for the existing supermarket chains (Alexander, 2015).
Legal Factors
There are several legal factors influencing the business performance of Sainsbury. There is new
tax introduced by the UK government named as the sugar tax which is aimed to reduce the sugar
in the drinks by 20% which will have an impact on the own brand products of the supermarket.
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SWOT analysis
Strengths
 One of the major strength of such a company is the online sales of the retailers which
have given the competitive advantage to such a company.
 There is the strategic distribution of the channels by the company which provides the
flexibility to the customers of such company.
 There is competitive advantage achieved by the company by taking over the company
Argos.
Weaknesses
 There are only stores of such company in the UK which might limit the growth of the
business as well as the range of the customers.
 There is a weakness due to the losses of the company Argos which has a negative impact
on the profits of such company.
 There is a declining sale of the company over the years (Aluko and Knight, 2017).
Opportunities
 Sainsbury can encourage healthy eating habits in the customers to reduce the problem of
obesity in the UK.
 The aging population trend can also be embraced by the company Sainsbury by
incorporating the products of such shape and design that can attract aging customers.
Threats
 The decision of leaving the EU can cause a threat to the economic as well as the political
stability of the company.
 There is also a continuous alteration in the spending habit of the customers which is also
a major threat for the company.
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Porter’s five forces analysis
Bargaining power of buyers
There is high bargaining power of the buyers of Sainsbury due to the availability of different
other supermarkets such as Aldi, Asda, and Morrison. These supermarkets also offer the same
products hence the customers have many options.
Bargaining power of suppliers
There is low bargaining power of the suppliers due to the existence of several numbers of
suppliers for the supermarket chains in the UK market.
Threat of entry
There is a low threat of entry to such market because there is control of big four supermarkets on
the grocery market share of UK. There is also intense competition between existing key players
in the market.
Threat of substitutes
The threat of substitutes in this industry is very high for both kinds of items such as grocery and
non- grocery. There are many alternatives available for the products offered by such
supermarkets.
Competitive rivalry
There is very high competition for such a supermarket in the UK due to the existence of so many
supermarkets such as Lidl, Aldi, Asda, and Tesco.
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Key challenges faced by the company
Following are the key challenges faced by Sainsbury:
 Increasing competition in the market
 Continuous advancement in the technologies
 The economic crisis due to Brexit
 Political uncertainty (Ejlerskov, et. al., 2018).
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Conclusion and Recommendations
It has been concluded from this report that there is a great influence of external factors on the
performance of a company. This report has highlighted the macro and microenvironment
analysis of company Sainsbury. There is also highlighted the key challenges faced by the
company which is required to be faced by the company to be successful. It is recommended that
the company should keep itself upgraded with the latest technologies to gain a competitive
advantage in the market. On the other hand, the company is also required to revise their pricing
strategies in order to increase the customer base in the local market.
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References
 Alexander, A., 2015. Decision-making authority in British supermarket chains. Business
History, 57(4), pp.614-637.
 Aluko, O. and Knight, H., 2017. From the corner store to superstore: a historical analysis
of Sainsbury's co-evolution. Journal of Management History, 23(4), pp.423-435.
 Ejlerskov, K.T., Sharp, S.J., Stead, M., Adamson, A.J., White, M. and Adams, J., 2018.
Supermarket policies on less-healthy food at checkouts: Natural experimental evaluation
using interrupted time series analyses of purchases. PLoS medicine, 15(12), p.e1002712.
 Riches, S.P., Aveyard, P., Piernas, C., Rayner, M. and Jebb, S.A., 2019. Optimizing
swaps to reduce the salt content of food purchases in a virtual online supermarket: A
randomized controlled trial. Appetite, 133, pp.378-386.
 Sorrentino, A., Pantaleo, A.M., Markides, C.N., Braccio, G., Fanelli, E. and Camporeale,
S.M., 2018. Energy performance and profitability of biomass boilers in the commercial
sector: the case study of Sainsbury's stores in the UK. Energy Procedia, 148, pp.639-646.
 Wilshaw, R., 2018. UK Supermarket Supply Chains: Ending the human suffering behind
our food.
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