Sainsbury's Business Strategy: A Comprehensive Analysis

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Business Strategy
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Table of Contents
Introduction................................................................................................................. 3
LO1............................................................................................................................. 4
Organisation profile................................................................................................. 4
Analysis of macro environment................................................................................4
Critical analysis of macro environment....................................................................5
LO2............................................................................................................................. 6
Analysis of the internal environment and capabilities of the organisation................6
SWOT analysis........................................................................................................6
VRIO analysis..........................................................................................................7
LO3............................................................................................................................. 9
Porter’s five forces...................................................................................................9
Appropriate strategies for the business...................................................................9
LO4........................................................................................................................... 11
Application of models for interpreting and devising strategic planning..................11
Strategic management plan...................................................................................12
Critical interpretation for strategic direction, objective and tactical action..............12
Conclusion................................................................................................................ 13
Reference List...........................................................................................................14

Introduction
Business strategy can be defined as a set of actions and measures that are
competitive and are adopted by the organisations such that it can attract consumers,
compete with other organisations in the market, gain a competitive advantage over
other organisations in the market and achieve that has been set for the organisation.
The business strategy is a draft of the way an organisation must work or operate
such that it can achieve its goals and objectives. In this assignment, the organisation
Sainsbury’s has been chosen in order to outline the business strategy that it adopted
in order to gain competitive advantage over other organisations in the retail industry.
The impact of the forces or the factor of macro-environment on the organisation has
been discussed in the assignment along with its critical analysis. The internal
environment of the organisation has been discussed in the assignment along with
the illustration of its capabilities. Porter’s five forces have been used in order to
analyse the competitive factors that affects the organisation. Various models and
theories have been applied in order to devise as well as interpret the strategic plans
that are used by the organisation, as if Bowman’s extended model and Porter’s
generic strategy in order to analyse the operation of the organisation and its
strategies.

LO1
Organisation profile
Sainsbury’s is a well-known organisation in the retail industry and has the second
largest chain or sequence of supermarket in the UK. The share of Sainsbury’s 15.3%
in the market and the organisation has its headquarters in London. The CEO of the
organisation is Mike Coupe since 2014 to till date. The revenue generated by the
organisation in 2018 was 2,845.6 pounds. The organisation has a number of
subdivisions like Home Retail Group, Sainsbury’s Bank, Argos, and many others.
Vision
Sainsbury’s vision is to become the retailer that is the most trusted one by people
(Sainsburysjobs, 2019). The organisation believes in connecting the talent along with
diversity and creativity of its people so that the customers can be given the best
experience when they shop in its supermarket.
Mission
Sainsbury’s mission is to become the first option of the customers in terms of food,
products of excellent quality, as well as excellent service at reasonable cost by
working together and at a fast pace (About.sainsburys.co.uk, 2019).
Objectives
The objective of the organisation is to support its people in their well-being, take
actions or measures that support the sustainability of the environment, provide
quality goods and services to people thus becoming the most preferred retail
organisation of the customers.
Analysis of macro environment
The macro-environmental factors that affect the operation of an organisation include
the forces that cannot be controlled and affects the decision-making process of the
organisations. The macro-environmental factors affects the strategies as well as the
performance of the organisations and involves the political as well as economic
situation, the changes in technology, economic forces, natural as well as legal
forces. The PESTEL tool can be used in order to analyse the external forces that
affects the operation of Sainsbury’s in the United Kingdom. The PESTEL analysis of
Sainsbury’s with respect to the country the United Kingdom have been described
below:
 Political factors: The United Kingdom is politically stable, however, its decision
of leaving EU (European Union Law) has affected its political stability. Brexit has
become one of the top challenges that the UK is facing in the present scenario. If
the country is ranked in which 1 signifies the top position while 7 signifies the
lowest position, it can be stated that in terms of civil and political freedom or
liberty UK stands at the 1st position (Raconteur.net, 2017).
 Economic Factors: The score of the UK in terms of economic liberty is 78.9,
which make the nation’s economy the seventh independent nation as per the
index of 2019 (Heritage.org, 2019). The score of the nation has augmented by
0.9 score. However, Brexit has lead to financial crisis in the nation thus leading to

deficiency in its structure. Nevertheless, the UK possesses one of the most
efficient environments of investment and business in the world. The GDP of the
country is 2.9 trillion US dollars.
 Social Factors: The population of the United Kingdom is ageing. As per reports,
the number of old people in the country is more than the number of young people
in the country (Assets.publishing.service.gov.uk, 2019). However, the attitude of
people is changing with respect to the organisations in the retail industry and the
kinds of products that they desire from the retail industry. The purchasing
capacity of the people thriving in the country is high as they have high standard of
living and have high per capita income.
 Technological Factors: The United Kingdom has always taken the initiative of
taking adopting the latest advancements or developments that takes place in the
field of technology. The government of the country believes in enhancing the
public services, lives of people by adopting the technological advancements with
open arms (Assets.publishing.service.gov.uk, 2019).
 Environmental Factors: The degradation in the quality of environment has
become a major issue in the present scenario all around the world. Thus, the
government of every country is taking the initiative of responding appropriately so
that the environment can be protected and the changes in climate can be
controlled (Azocleantech.com, 2015). In the same way, the government of the UK
has formulated several policies and legislations in order to make sure that the
environment can be protected from degradation. In order to attain the same it is
required that the organisations operating in the nation abide by the laws and
policies so that they can run smoothly.
 Legal Factors: There are several laws that govern the administration of the
organisations in the UK like discrimination law, consumer law, copyright law,
employment law, import/export law and many others
(Uk.practicallaw.thomsonreuters.com, 2019).
Critical analysis of macro environment
It is required that Sainsbury’s offers quality products and services to people provided
that environment is hampered. It is necessary that the organisation takes into
consideration the ageing population in the nation and provide them services
accordingly. The organisation needs to adhere strictly to the laws and policies as
devised by the government of UK so that it can operate without any hurdle. However,
as the rate of growth of GDP in the UK has become sluggish it is necessary that the
organisation to devise new strategies to attract more customers and increase its
sales (Ig.ft.com, 2019).

LO2
Analysis of the internal environment and capabilities of the organisation
Beside, macro-environmental analysis, the organisation needs to analyse its internal
factors as well as internal capabilities that promote business growth. Internal
environment analysis can help the organisation to understand the strengths and
weaknesses in the case of improving its profitability range. In the case of analysis of
internal strengths, weaknesses as well as capabilities, the organisation needs to
identify proper frameworks. SWOT and VRIO have been conducted to understand
and analyse internal environmental factors.
SWOT analysis
SWOT framework is generally conducted to understand the strengths, weaknesses,
opportunities, and threats of a particular organisation. In this case, the study has
chosen Sainsbury for understanding their capabilities within the current market.
Strengths
● The organisation has diversified
its business growth in the
international market
● The market share of the
organisation is approximately
14.6% after Tesco
(Sainsburys.co.uk, 2019)
● Sainsbury has positioned second
place in the area of supermarkets
● The organisation has a strong
customer base in relation with
other competitors
● About 175000 people are working
within the organisation
Weaknesses
● The company has faced some
problems in maintaining the
proper strategy
● The organisation does not follow
a suitable strategy to run single
market operation
● After the Brexit event, the
profitability range of the
organisation has become lower
than earlier
● The organisation has faced some
issues in providing online
services
Opportunities
● Strong market share of the
company can help in globalizing
their business operation
● Implementation of e-commerce or
online services provide the
opportunities of distributing their
products and services in a
significant manner.
● Improvements in technology can
help the organisation to modify
and improve their performance
quality with respect to other
competitors within the market
● Better performance and services
of the organisation can help in
Threats
● Increased product price can be
considered as a major threat for
the company
● Brexit is one of the key reasons
for declining the range of
organisational profitability as well
as productivity
● The entrance of new competitors
is another major threat for the
company
● Substitute products of other
company can decrease the sales
of Sainsbury (Bentham, 2018)
● Changes in trade rules and
regulations can provide negative

reaching customer’s satisfaction
levels
● The organisation can be able to
get good customer experiences
by understanding their specific
needs and expectations
influence on the business
operation of the company
● Declining in GDP rate can also
harm the economic state of
Sainsbury
Table 1: SWOT analysis of Sainsbury
(Source: Created by learner)
The framework provides an analysis of the internal strengths and weaknesses of the
organisation. The SWOT analysis also provides the analysis of several external
environmental factors such as operational opportunities as well as threats of the
company that influence the business operation. It has been analysed that the
company has strong market share that helps the company to enhance the business
growth in a highly competitive market. The strong market share of the company can
help in improving the profitability and productivity range, which are affected by Brexit
(Jenkins and Williamson, 2015). Additional to this, the organisation has strong and
potential customer base, which can help the organisation to minimise its weaknesses
of running single market operation.
On the other side, it has been analysed that the online service of the company is
very poor so that the organisation needs to coordinate with the IT department to
improve its e-commerce services. It has been identified that the product price has
been significantly increased due to Brexit. Therefore, it can result in declining
customer base so that the organisation can maintain their customer base with their
high-quality customer services. Technological improvements can play a potential role
in enhancing their performance quality (FATRICIA, 2016). The identified
opportunities of the company can help in minimising the threats of new competitors
within the market. It has been also analysed that new competitors can provide
substitute products of Sainsbury. This threat of substitution of products can be
minimised by providing high-quality products and services.
VRIO analysis
VRIO analysis is required for analysis of internal resources. With the help of this
analysis, the organisation can be able to understand the effectiveness of internal
resources towards sustaining competitive edge within the market. VRIO framework
helps in understanding, whether the resources provide a sustainable competitive
edge or competitive disadvantage. VRIO framework stands for valuable, rare,
imitable as well as organisable.
Internal
resources
Valuable Rare Imitable Organised Impacts
over
sustainabl
e
competitiv
e edge
Patent of Yes Yes No No Provides a

products
and
services
sustainable
competitive
edge
Food
products
Yes No Yes No Provides a
minimum
competitive
edge
Financial
state
Yes Yes No Yes Provides a
high
sustainable
competitive
edge
Employees Yes Yes Yes Yes Provides a
partly
competitive
edge
Table 2: VRIO analysis of Sainsbury
(Source: Created by learner)
The VRIO framework provides a brief understanding of internal resources of the
organisation. This framework has found that some internal resources provide a
sustainable competitive edge and some resources provide minimum competitive
advantages. It has been analysed that the financial resources of the company
provide a high range of sustainable competitive advantages that can help Sainsbury
to promote its business growth in a significant manner. The financial structure is so
strong that other competitors need a long period to maintain the same financial
structure. Additional to this, the patent of the organisation helps the company by
providing a competitive edge (Hammad, 2015). On the other side, it has been
analysed that employees of the company are highly skilled and trained than other
rival organisations. Therefore, the employees of Sainsbury provide partly advantages
in competitive market. Food products of the company can be imitable that other
competitors can provide substitute products. Therefore, the food products of
Sainsbury provide a minimum range of competitive advantages.

LO3
Porter’s five forces
Porter’s five forces model is a framework or a tool that is used in order to analyse the
competition that an organisation faces in the market. The model was devised by
Michael E. Porter in order to evaluate the competitive environment of an organisation
(Zhao et al., 2016). The Five Force Analysis of Sainsbury’s have been discussed
below:
 Competition in the industry (HIGH): The retail industry has a large number of
organisations in it as it is highly saturated. Several new organisations have been
established in the industry that has intensified the competition. The organisation
is facing tough competition from its rivals namely TESCO, Argos, Waitrose,
Iceland, Morrison, Aldi, Ocado, and others (Owler.com, 2019).
 Probability of new entrants into the industry (LOW): It is difficult to make an
entry into the retail industry in the present scenario because the retail industry is
highly complex and requires huge investment. Moreover, the industry is highly
saturated that has emerged to be a big a barrier to make an entry into the
industry. Local knowledge or information is highly important in order to make an
entry into the market, thus, the threat faced by Sainsbury’s in the field is low.
 Control of suppliers (HIGH): The bargaining power of the suppliers in the retail
industry is high as well as complicated. Moreover, if the supermarkets do not
directly interact with the consumers in terms of selling its products then suppliers
might become more powerful.
 Control of customers (HIGH): The power of the consumers is high in the retail
industry due to the presence of several organisations in the market. If an
organisation fails to provide innovative and differentiated products to the
customers then its sales might fall manifold. In case of recession, the power of
the consumers increases further.
 Threat or risk of alternative products (LOW): The retail organisations provide
commodities that are necessary for the consumers. Therefore, the chances of
replacement of the products offered by Sainsbury’s are low.
Appropriate strategies for the business
In order to devise appropriate strategies with respect to the improvement of
Sainsbury’s position in the market and competitive edge Ansoff Matrix can be used.
The Ansoff Matrix is a tool that is used to devise various strategies of growth and
development. The strategies that are a part of Ansoff Matrix are market penetration,
market development, diversification, and product development. The different
strategies of Ansoff Matrix have been explained below:
 Market penetration: In this case, the organisations try to augment its share in
market and grow by entering new markets with its existing commodities.
 Market development: The organisations in this case, try to grow by aiming the
products that it has in the new segments of market.
 Diversification: This strategy requires the company to develop products of
different types and provide the target customer segments with variety of choices
within the product portfolio.

 Product development: The business can develop new products as per the desires
of the target consumer group and cater to the specific need of the consumers
through trading activities.
Considering the competitive business environment Sainsbury operates within, it
would be beneficial for the organisation by making certain changes in their business
strategy through market and product development strategies within the business
scenario. The institution would gain profits by planning to develop their share through
entrance in new markets. This could be achieved by applying better product
development procedures and innovating new techniques in business performance.
Market development: Sainsbury could integrate collaboration and joint venture as
market entry strategies to explore new market segments or establish new customer
segments through better advertising and marketing principles. The development of
new markets through selection of new consumer groups would be beneficial for the
business institution. As opined by Bouncken et al. (2018), market development is an
effective strategy for organisations operating in competitive transactional
environments.
Product development: The development of new products through better
procedures and innovative techniques of production and maintaining the quality of
products and services could provide benefits of market expansion and growth in the
competitive business environment. The retail institution would be requiring evaluating
the demands and requirements of the target customers efficiently in recognising the
type of products that needs to be developed. According to the views developed by
Hoskins and Griffin (2019), developing new products require organisations to apply
better research and development procedures in their production aspects.

LO4
Application of models for interpreting and devising strategic planning
Porter’s generic strategies allow organisations to develop their business strategy in
an effective manner that would increase their profitability in a competitive
transactional scenario. The quadrants within the framework of Porter’s generic
strategies include elements of cost leadership and cost focus in designing a
competitive advantage, the development of differentiation and differential focus
allows organisations to enhance their competitive advantage within a business
environment as well (Ifm.eng.cam.ac.uk, 2019).
Application of Porter’s generic strategies for Sainsbury it can be observed that the
organisation follows a differentiation strategy in their business model. The brand
aims to provide quality products at affordable price to their customers.
Cost leadership: The strategy of cost leadership allows businesses to provide low
cost products and services to the target customers. It ensures the customers are
able to purchase products from the business at lowest price. The integration of this
strategy is evidenced for Sainsbury’s competition such as Tesco and Aldi. Sainsbury
does not apply the strategy of developing products at lowest cost in the competitive
retail sector within the business environment.
Cost focus: The focus strategy of cost leadership allows organisations to gain
profits from the integration of low-cost feature to marginal segment within the product
portfolio. The narrowed segment of business strategy through cost-focus allows retail
organisation such as Asda and Lidl to garner better profits and enhance their market
share in the competitive business environment. Sainsbury does not apply tenets of
cots-focus strategy within their business operations and it is evidenced from the
pricing strategy the organisation applies in their operations.
Differentiation: The aspect of differentiation allows businesses to develop products
and services of variety. It enhances the product portfolio for the organisation and
increases the scope of generating better profit through business operations.
Sainsbury follows differentiation as the primary business strategy in the competitive
market scenario.
Differentiation focus: The focus of businesses in developing strategies focusing on
diversification and differentiation allows businesses to garner better profit through
narrowed segments in their diverse product portfolio. Sainsbury applies
differentiation focus on the quality and freshness of groceries and daily consumable
products. This enhances the brand image of the company and maintains customer
satisfaction within the business environment.
Bowman’s strategy clock as a strategy development framework enables
organisations functioning in the retail sector to identify the competitive positioning of
the organisation through the different pricing strategy and product diversification
aspects the organisation applies in their business performance. Considering
Sainsbury’s operations in the market section, it can be identified that the company
follows a focused differentiation strategy in their business operations and is in
position 5 within the Bowman’s strategy clock.

Figure 1: Bowman’s strategy clock
(Source: Extracted from support)
Strategic management plan
Evaluation of the existing business strategy that Sainsbury implements in their
business operations, it is identified that the integration of diversification of products
and differentiation focus has allowed the organisation to gain competitive advantage
in the business sector. Combined with the strengths of the available resources within
the organisation, it is observed that the company could gain better results from their
business operations through the trading aspects in the business environment.
Sainsbury has to develop a better cost leadership strategy in combination with the
differentiation and diversification strategies that the company follows in providing
their customers with necessary products. The business operations of Sainsbury
would gain better competitive advantage through the application of Hybrid strategy
as per the Bowman strategy clock framework. Implementing the Hybrid position in
competition with other rival brands would allow the business institution to gain better
results from their business transactions. This would allow the organisation to acquire
position 3 in the framework, suggesting high-perceived value from the target
customer segment. The implementation of product diversification and cost focus
would be beneficial for Sainsbury in surviving the competitive retail market.
Critical interpretation for strategic direction, objective and tactical action
It is essential for Sainsbury management to develop their business operations as per
the notions of strategic planning through implementation of cost focus, market
development, and product development through differentiation focus in order to
sustain their competitive advantage within the business scenario. The suggested
improvements to business operations would provide Sainsbury with advantages in
gaining profit through better sales as market development would allow the
organisation to conduct transactional activities in new areas. Cost focus and
differentiation would increase the opportunity for the company in developing their
business operations as per customer needs and gain competitive advantage within
the business environment.