Sainsbury's Business Strategy: Internal and External Analysis

This report provides a comprehensive analysis of Sainsbury's business strategy, focusing on its position within the UK retail market. It begins with an introduction to business strategy and an overview of Sainsbury's, including its mission, vision, and objectives. The report then delves into the macro-environmental factors affecting Sainsbury's using a PESTLE analysis, examining political, economic, social, technological, environmental, and legal influences. It further explores Sainsbury's internal capabilities through an internal analysis, identifying its strengths and weaknesses. Subsequently, the report applies Porter's Five Forces model to evaluate the competitive forces within the organization. Finally, it applies strategic models and concepts to interpret and devise strategic planning recommendations for Sainsbury, offering insights into its future direction and competitive advantage. The report concludes with a summary of key findings and a list of references.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1 ................................................................................................................................................1
BRIEF INTRODUCTION OF ORGANIZATION ....................................................................1
Influences and impacts of macro business environment..............................................................2
LO 2.................................................................................................................................................5
INTERNAL ANALYSIS AND CAPABILITIES OF SAINSBURY.........................................5
LO 3.................................................................................................................................................7
APPLY PORTER'S FIVE FORCE MODEL AND EVALUATE THE COMPETITIVE
FORCES IN ORGANIZATION..................................................................................................7
LO 4...............................................................................................................................................10
APPLYING MODEL, CONCEPTS, INTERPRET AND DEVISE STRATEGIC PLANNING
FOR SAINSBURY....................................................................................................................10
CONCLUSION .............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Business strategy is a framework prepared to achieve vision, mission and objective of the
organisation. It is the tool that aims to achieve competitive advantage for the organisation over
another competitor. Every business aims that its business strategy should be such that it can't be
duplicated by others. The present study is done on Sainsbury, a large retail supermarket of UK.
Apart from this a briefing is done on macro environment of Sainsbury that includes legal,
political and ecological environment. Furthermore, it also includes social, economic and
technological factors that affect the business environment (Comino and Ferretti, 2016). In
addition to this there are several factors that are present within the internal environment of the
business that is discussed in detail. Apart from this, the present study contains Porter’s Five
Forces model that is described to identify the competitive strategy of the company. Furthermore,
the present study contains theories and concepts for the interpretation of strategic direction of the
organisation.
LO 1
BRIEF INTRODUCTION OF ORGANIZATION
Sainsbury is a large retail chain in UK, which was supported by John James Sainsbury in 1869 as
well as has 16.9% share of the retailing market. It mainly offers food products and groceries.
Currently 186900 employees are working in its organisation. Its net income is £309 million and
operating income is £518 million. In addition to this it offers 32000 varieties of products.
Mission: To be the consumer's first choice for food by delivering products of outstanding quality
and great service at a competitive price and working 'faster, simpler and together.
Vision: To be the most trusted retailer where people love to shop and work.
OBJECTIVES
Following are the objective and mission of Sainsbury-
 To maintain simplicity and efficiency in delivering and offering services and products.
 To make improvements in products so that demand of new customers can be meet
 To increase sales by offering better services and encouraging teamwork
 Respecting each individual in the organisation (Gürel and Tat, 2017).
 To deliver great service to the customers
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 To make use of new technologies so that waste can be minimized and productivity can be
increased
 To offer value added products to the existing range as well as new customers
Influences and impacts of macro business environment
The business environment is considered to be a complex, dynamic and multifaceted in nature and
it also has a far-reaching impact on the business growth and survival as well. Every business
organisation gets affected and influenced because of the macro environmental elements or
factors. Sainsbury's aims at effectively analysing the macro business environment so that it can
identify its impact and influence on the internal elements of organisation. The PESTLE analysis
framework is being utilized for examining the macro environmental components (Zahari and
Romli, 2018.). This analysis effectively examines the influencing factors of the business
organisation. Following is given the brief description of the PESTLE analysis:
Political component
This consists of tax policies, labour laws, foreign trade policy, environment laws,
government stability, legislative regulation of an economy, trade restrictions and so on.
Sainsbury's is a multinational company thus it is greatly influenced by the political changes of a
country it is operating in. The globalisation approach implemented by Sainsbury's may lead to
bring great opportunities as well as challenges for the company. Increasing pressure from World
trade organisation regulation have influenced retail, operations of Sainsbury for a long run. Like
changes in taxation policies where local government is looking for specific change in tax policy
with regard to carbon foot print.
For example, in the UK economy, debt rates on consumers and on government are very
high, that leads to bring impacts on the attitude of customers and also on conditions of business
organisation. In this kind of situations, the company has to focus on operating in such marketing
conditions and also focus on effectively running the business operations and activities
continuously (Nurmi and Niemelä, 2018).
Economic component
These factors lead to bring significant impact on how company does business. This
includes interest rates, exchange rates, economic growth or stability of a country, inflation
situations, disposable income of customers and so on. Sainsbury's business operations and
activities may get affected and influenced due to the lifting prices of fuels. However, changes in
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economic factors have significantly influenced Sainsbury's business because of recession, debts,
unemployment, hike in food prices. Further, Downward pressure on consumer spending denotes
inequality in consumer ability of spending for which it is important for the firm to focus n
consumer buying behaviour and preferences. Increase in cost agencies leads to affect the supply
chain of the company. One more example of economic factors that may lead to affect the
activities of Sainsbury's can be the recognition crunch. This factor may bring immense impact on
the gross revenue of the company because the customer will lead to have less buying power. In
contrast to this is that customers will be more focused on their disbursements and buying less
expensive products which can be stated as good impact on the net income of Sainsbury's.
Social component
These factor are also called as the socio-cultural factor and this may include shared
attitudes and beliefs of target- market customers. Social factors lead to greatly impact and
influences the products, services and operations of the company. These factors are age
distribution, career attitudes, social beliefs, population growth, education rate, health
consciousness and many more. The broader attitudes towards migration is negative in UK which
impacts ability of Sainsbury to bring international managers and leaders to manage operations in
country. Also changes in media outlets is also influencing public opinion in UK with can assist
Sainsbury on leveraging better market and position of its products.
The social factors lead to bring dramatical changes on the shopping habits of people that
may affect the UK grocery business Sainsbury's for example. British people or shoppers choose
for their big weekly food shopping rather than spending money for numerous trips to the local
convenience stores. And this leads to bring great influences on the sales and profits of the
Sainsbury's supermarket business. One more example can be that in the fast pace world,
consumer prefers such places for shopping where they can have all the products under one roof
only. Due to these changes, Sainsbury's gains many benefits as it has stores that provide all the
food products as well non-food products.
Technological component
This is the most influencing factor which affects business operations and activities.
Business organisation gets influenced on its marketing operation and management activities due
to the changes in the technological factors. The technological advancements and up-gradation
lead in bringing immense impacts and influences on how any company produces its products and
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services, it brings new methods for distribution of the products and services and also fresh and
innovative methods for communication with the customers. Maturity of technology is the most
influencing factor for Sainsbury where technology in retail sector has reached to higher level and
players in market are focusing on innovations to capture high market share which has increase
competition for the retail business.
For example, various business organisations aim at adopting and implementing digital
revolution and operate their business through online channels. Therefore, Sainsbury's also adopts
and implements this technological advancement in its business operations to cope up with the
marketing trends. The company has introduced digital services for example, food shopping
through online methods and also click-and-collect facility through which consumers can put their
orders on online and also collect shopping materials from the local supermarkets. These changes
in the business operations has led to bring changes in its sales. The online retail sales have
experienced 80% increase.
Environmental component
Such factor have been come to forefront since the last fifteen years and have also become
essential as because of the exploding scarceness of the raw materials, carbon footprints target,
pollution targets, ethical and sustainable activities of business (SHTAL and et.al., 2018). The
recent trends are bringing influences on the UK retail industries and this includes increase in
ethical and environment conscious customers who demands companies for adopting to ethical
and sustainable practices. The customers continuously demand for implementation of sustainable
activities such as paper packaging, using recycled materials, etc. Apparently, customer activism
is another influencing factor for Sainsbury which states about awareness of customers about
environmental factors and legal and ethical standards.
For example, Sainsbury's has started zero waste supermarket as this is the new trend in
environment which is faced by the food retail industry nowadays. This is because food waste is
increasingly becoming the greatest environment challenges for the retail food industries.
Legal component
This factor also leads to greatly and immensely impact the operation and activities of
business. Such factors include safety and health regulations, standards of advertising, consumer
legisltaion, legislation for product labelling, equality regulations, safety of product, etc.
Company need to know about what is legal and what is not so that it can trade successfully
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(Graham, 2018). Sainsbury's is considered as the good bounded by various legal issues such as
intoxicant merchandising age, statute law, policy for national minimal pay, favouritism and also
just statute legislation, etc. Protection of invention and in novation for Sainsbury in UK market is
complex because of increasing competition and legal protection updation like patent, copyrights,
trademarks, etc.
For example, legislation which introduced tax for the ads for fatty and highly processed food
items which has been then smartly adapted by the company Sainsbury's and made modifications
in the products. Sugar tax regulation was introduced by the government of UK which aims at
reduction of the sugary content in drinks by 20% by the year 2020 leads to bring great impacts
on the supermarket brand products.
LO 2
INTERNAL ANALYSIS AND CAPABILITIES OF SAINSBURY
Internal analysis of an organisation includes strengths, weaknesses, opportunities and threats that
it has over other competitors.
Strengths
Strength of an organisation includes all the aspects in which company is good at. It may
include customer loyalty, innovation, use of new technology, strong brand loyalty etc. Similarly,
Sainsbury has many strengths like its experienced leadership team that helps in influencing and
encouraging people in the organisation so that maximum contribution can be achieved. In
addition to this selected company is one of largest supermarket chains of UK and has its outlets
in the city of London and various other region (Gürel and Tat, 2017). Apart from this it uses very
effective promotional tools that include TV advertisement, internet, Website so that it can reach
to larger audience and increase demand of its product. Furthermore, it runs various online
campaign for the purpose of promoting its food products and groceries. Another strength of
Sainsbury is that it is listed on London Stock exchange and FTSE Index that protects the interest
of the investor and protects them from the negative effect of the unfair trade fair practices that
may be done by the company. In addition to this it has over 600 supermarkets and over 800
convenience stores across UK. It also sponsored several events like Paralympic etc. for the brand
promotion and CSR activities (Jasiulewicz-Kaczmarek, 2016).
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Furthermore, it has a powerful balance sheet with accordant profits and has diversified
enterprises with strong market share and it has good and flexible working environment. In
addition to this it offers quality products due to which it has a good brand in the market
Weaknesses
It restricts organisation to achieve its objective as it includes all the areas or aspects
which need to be improved by the company. It hinders the growth of the organisation due to
weak brand positioning, high level of debts, inadequate supply chain, lower turnover, lack of
capital etc. However, Sainsbury lacks financial control increase in inflation, in the economy of
food prices because of which Sainsbury were forced to increase their prices which has had a
huge impact on its sales due to which profits were decreased. In addition to this it offers products
with low margin that gives low revenue to the firm. Furthermore, it is operated in single market
due to which it cannot reach to larger audience (Jasiulewicz-Kaczmarek, 2016).
Opportunities
These are the factors which acts in favour of the organisation. It includes all the factors
that can increase the growth of the firm in future. For example, if government reduces tax then
company can increase its productivity with low cost of productivity and increase its sales and
revenue and market share (Li, 2015). Similarly, Sainsbury is also now collaborating with other
countries for expanding its market throughout the World. Furthermore, it has entered new
markets through joint ventures and partnership. Apparently, to manage with advancement in
technology Sainsbury adopted new self-checkout machines that helps Sainsbury to open its
store 24 hours that will boost its sales. Apart from this Sainsbury has now entered in the growing
economies like Africa, Asia etc. It also has online retail store and convenience retail store that
which are the channels for future growth (Kumar and Bansal, 2015).
Threats
These are the factors that have potential to harm the position of the organisation. These
factors have negative impact on the organisation. For example, natural calamities can be a threat
to the wheat producing and food companies. Similarly, there are various challenges faced by
Sainsbury like globalisation that can ruin the image of the company as it has other competitor in
the international market that provide more quality product in the same price (Yan, Xia and Bao,
2015). So, it has to serve best quality continuously to maintain its position. There are various
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competitors of Sainsbury. For example- ASDA, Boots, Walmart, Amazon, Tesco, ALDI etc.
which can replace Sainsbury.
LO 3
APPLY PORTER'S FIVE FORCE MODEL AND EVALUATE THE COMPETITIVE FORCES
IN ORGANIZATION
Porter's five force model is a strategic management technique which aids define the competitive
point of view of the business. Each of the force referenced in the model and their strengths aid
strategic planners know the integral profits possible within Sainsbury. This model affects profits
and improves the strategy for increasing competitive edge and long terms profits in retail
industry (Mathooko and Ogutu, 2015). Five forces are such as follows:
Source: https://i2.wp.com/www.business-to-you.com/wp-content/uploads/2017/04/Five-Forces-
Model-Porter.png
Rivalry among existing competitors
The number of challengers like Tesco, ASDA, Aldi etc. in which selected Sainsbury operates.
These are also large in size which refers that organizations will not make changes without
existence unmarked in business enterprise (Riasi, 2015). Some rivals have larger market share
which refers that they will get involved in competing activity to increase orientation as well as
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become market leaders. This can make stronger force of rivalry existence between companies
within the business. There are large number of competitors to Sainsbury in the retail industry
which can highly affect the company profits and sales in this type of business. This impacts
negatively on sales and profits of the firm within the retail industry.
Bargaining power of suppliers
The number of providers in business in which Sainsbury operates as compared to their buyers
which refers to suppliers have less control over prices and creates the bargaining force of
suppliers is very weak force. In this context, these suppliers give reasonably exchangeable and
fewer distinguished and have low shifting prices (Riasi, 2015). These suppliers have give the
reasonable pricing which makes weaker force of suppliers. Due to poor Christmas sales,
company imposed 2% discount on all recent and existence orders from the suppliers. The power
of suppliers is high as compared to others which impact positively on sales and profits of
Sainsbury within the retail industry.
Threats of New Entrants
The economics of scale is reasonably difficult to achieve in business enterprise in which
organization is operated which creates it easier for those making huge changes to have cost
benefit. Also, it creates production expensive for new entrants. This creates weaker force to
threats of new entrants (Huggins and Izushi, 2015). The product differentiation is powerful
within the retail business where companies like Sainsbury sell different goods instead of
standardised good. Consumers are looked for differentiated goods. There is powerful present on
ads and consumer services. This impact negatively on sales and profits of firm within the retail
industry.
Bargaining power of buyers
The number of buyers in retail business enterprise where Sainsbury functions, is significantly
bigger than number of organizations selling products. This refers buyers have some companies to
select forms, therefore do not have much control over prices. This creates weaker force of
bargaining power of buyers within retail industry. The income of consumers is very low which
refers there is pressure to buy at low pricers that making purchasers more price sensitive. Thus,
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it is the weak force within the industry (Huang and et.l., 2015). In order to do that, the company
is directed on innovation as well as discrimination to attract more buyers. The different product
and its quality are essential which can help to obtain a large number of consumers that are
attracted within the retail industry.
Threats from substitutes products
There are some secondary accessible for products that are made in business enterprise in which
selected company is operated. Some substitute products acquirable are advanced quality but
more expensive. Comparatively firms like Sainsbury producing and selling at lower prices with
adequate quality as compared to the substitute products. Therefore, company focus on giving the
high quality in its goods (Zhao and et.al., 2016). As outcome, buyer will select its goods that give
larger quality at lower prices as compared to substitute goods. Also, Sainsbury focus on
differentiated goods which will ensure that buyers see their goods as specific and do not switch
easily to substitute goods which do not give these unique advantage. This impact negatively on
sales and profits of firm within the retail industry.
Appropriate strategies for competitive edge
After evaluation of model, Sainsbury needs to focus on particular strategy which help to raise the
profitability and improving competitive advantage in the retail industry. Also, company is
utilised the strategic management plan which aid to create the higher position as compared to
their competitors. In order to that, company also follow cost leadership strategy which involves
in Porter's Generic strategy which is having the low cost of operation in business enterprise
(Mathooko and Ogutu, 2015). It is the strategy to decrease prices as well as make least expensive
products in market and business in an effort to increase market share. This modern companies
atmosphere is very difficult as well as well-informed one with customers being aware of
selection available for them. Business who have least manufacture prices are capable to offer
similar level of quality of products as compared to their challengers for the much lower prices.
This can help to increase the sales and profits of company as well as market share. Also, this can
aid to create the position within the retail industry.
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