Applied Corporate Strategy: Sainsbury's Business Environment Analysis

This report provides a comprehensive analysis of Sainsbury's corporate strategy, examining its business environment, internal strengths, and external threats. It begins with an introduction to corporate strategy and its importance, followed by an in-depth external analysis using PESTLE and Porter's Five Forces frameworks to assess political, economic, social, technological, legal, and environmental factors, as well as competitive dynamics. The internal analysis explores Sainsbury's strengths, such as brand awareness and mergers, and weaknesses. The report evaluates the company's strategic choices, including opportunities like international expansion and threats such as competition and supplier power, concluding with an overview of the retail giant's position in the market.

APPLIED CORPORATE
STRATEGY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
External analysis as well as business environment of organization............................................3
Internal analysis of the organization ..........................................................................................6
Strategy evaluation......................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Corporate strategy is predominately the series of actions undertaken by organizations for
managing its resources as well as risks and helps them to gain the competitive advantage.
Corporate strategy mainly encompasses the activities of organizations for achieving their
objectives as well as goals and for establishing position in market. The main aim of this report is
to analyze the business environment of Sainsbury in order to understand effectiveness of its
corporate strategy. Business environment is primarily the mixture of various internal as well as
external factors which directly or indirectly impacts the operations and functioning of the
organization.
Sainsbury is basically the supermarket chain as well as retail organization being
established in 1869 by John James Sainsbury and headquartered in London, U.K. This
organization mainly operates in supermarkets but has various subsidiaries of fuel, cafe, banks,
energy etc.
This report gives an overview of external analysis as well as business environment of
organization, internal analysis of the organization and strategy evaluation.
MAIN BODY
External analysis as well as business environment of organization
Business environment is predominately is collection of various factors both internal and
external which helps the organizations to take effective decision and affects its operations.
Pestle analyses
 Political; factor: Political unrest situation crate threat to firm as it creates problem in
sustaining in market for longer duration whereas political support, free trade agreement
works as opportunity to firm because this encourages globalisation of Sainsbury. Hence
the political instability is threat to firm. On the other hand, there, firm have the major
level of the Brexit uncertainties as the serious consequences for Sainsbury’s, among other
English supermarket chains. Leaving the European Union could make it much more
difficult for supermarkets to affordably import products from abroad. So, the Brexit
uncertainty is threat for firm
 Economic factor: High employment rate is opportunity to company whereas high tax
rates are threat to Sainsbury. On the other hand, there the serios level of implication can
be there due to the increase level of cost of fuel and raw material. the employee has the

higher level of expectation of salaries in company in term of experience and better
understanding is threat for firm
 Social factor: Culture sometimes work as threat because due to which Sainsbury fails to
meet desires of wide range of consumers. As per the aspect of socials factored there
changing level of social trends of the company terms to be an extremely important for the
Sainsbury to track for supermarket chains. On the other hand, the company discounting
theme for the loyal customer is succeed to be the opportunity of firm is proving the level
of satisfaction which have impacted in the product.
 Technological factor: Technologies are opportunity to business new technique raise
productivity that enhances profitability of Sainsbury. Sainsbury’s have the option in the
selling online food along with collecting their purchases from the respective level of local
stores as per the urgent requirement. On the other hand, the company have the negative
level of impact due Advancements in the technology the overall cost of production of the
product. This have the threat to the firm.
 Legal factor: Change in employment law are threat to business because it influences
entire operation of company. On the other hand, the company have the negative impact
due to threw laying down of government rules in order to have the stoppage in promoting
the its High-fat, salt and sugar foods to the children below 16 years of age. This leaves a
less room for Sainsbury’s to do its promotion.
 Environmental factor: CSR responsibility is fulfilling by business this is opportunity for
firm because it raises productivity of Sainsbury. The company have the major level of
emphasis of the supporting the UN sustainability goals along with working to have the
reduction of the carbon emissions and with reducing the food waste in perfect manner.
Thus, Sainsbury can focus on healthier food items as opportunity which company should
exploit is increasing its online channels. As now customers have become technology-
oriented thus company has the opportunity to invest within new sales and online
channels.
Opportunities

 The biggest opportunity which is available to Sainsbury is international expansion. Due
to the merger of Sainsbury and Asda, Sainsbury has the opportunity to expand its
operations in the different international market.
 The second opportunity which is available to Sainsbury is investing heavily within
technological advancements. With the growing awareness of customers towards
innovative products, Sainsbury has the chance to invest within research and development
and thus came up with more innovative products.
 Third opportunity being available to Sainsbury is growth in the villages (Ribeiro, 2018).
As merger of Sainsbury with Asda has bought a high number of opportunities for the
company among which one is expanding its supply chain in villages. Sainsbury along
with Asda can grow its business in the rural areas and villages.
 Fourth opportunity being available to company is increasing its revenue ratio and gain
economic uptick. Sainsbury has the chance to increase its cash flow by increasing its
innovative products as well as making use of the merger with Asda.
 Fifth opportunity which will help Sainsbury to grow and develop its business is the
changing behaviour of people towards their health. As customers have now become
highly conscious as well as concern toward their health and wants healthy and ready to
eat food. Thus, Sainsbury can focus on healthier food items.
 Sixth opportunity which company should exploit is increasing its online channels. As
now customers have become technology-oriented thus company has the opportunity to
invest within new sales and online channels.
Threats
 Th biggest threat which might affect the functioning as well as operations of Sainsbury is
the strong presence of various competitors like TESCO, Argos etc. Due to their high
brand image and recognition, Sainsbury might face downfall and will be a challenge for
company to sustain its competitive advantage.
 Another threat which might hinder the market position of company is its operations in
different countries. Due to its presence in various location, it remain exposed to changing
legal policies and this changing policies and rules might affect the company negatively.
 Third threat that will affect the functioning of Sainsbury is the increasing demand for
innovative and differentiated products. The growing need of customers for innovation

might become a threat for company as it would have to increase its innovation and
automation level. Fourth threat is rising power of the suppliers (Romano, 2016).
 Due to great number of suppliers, company might face a threat of paying the higher
margins to various local distributors. Fifth threat is the chaos between employees and
management. Due to the merger of Sainsbury with Asda, the might be the chances of
threat between employees as well as management for various aspects and this will be a
great threat for Sainsbury.
 Sixth threat is the rising power of consumers towards online channels. Due to this
growing power, Sainsbury would have to invest heavily in increasing its sales channels.
Porter fives forces
This is basically the framework which helps the organization to analyse their competitive
position within market and thus helps to determine competitive intensity.
Threat of new entrants
This threat is generally low for Sainsbury as in order to enter the retail industry a high
level of investment as well as resources are required which is difficult for the small business.
Besides this, for entering the industry a high capital is required which makes this threat mucjh
low and weaker for the company (Epstein, 2018). Talking of the risk, it is generally low for the
company as there are various barriers for entry. Sainsbury can eliminate this threat by building
the economies of scale. Besides this, it can continuously innovate its products as well as services
to increase industry attractiveness.
Power of the suppliers
The bargaining power of suppliers for Sainsbury is generally low with the large number
of suppliers being present within retail industry. This force is mainly low as due to high number
of suppliers they do not have much control over the prices as well as services. As the suppliers
are high in number thus organization can easily switch to other suppliers when they charge high
prices or are not highly efficient. In order to eliminate this risk, Sainsbury help in building the
efficient logistics and supply chain by investing heavily within multiple suppliers (McManners,
2016).
Power of buyers
The bargaining power of the buyers for Sainsbury is generally low due to great product
differentiation as well as quality. As there are only few firms from which customers can choose

to purchase the quality products as well as services thus this makes their switching cost much
low. Due to low switching cost, they do not impose much control over prices and thus makes this
force weaker as well as low. In order to tackle this bargaining power of the buyers, Sainsbury
can focus on differentiation as well as innovation which will help company to attract customers
(Pidun, 2019).
Threat of substitutes
The threat of the substitute product is generally moderate for Sainsbury. Due to high
product differentiation, it is difficult for the other firms to develop substitute products of the
products of Sainsbury but still there are still some of the substitutes which are available for
products and are being sold at low margin. Thus, this makes this force moderate. For mitigating
this risk, Sainsbury can mainly focus on providing high quality products to customers which will
be difficult to imitate (Wu, 2018).
Rivalry among firms
Due to merger of Sainsbury with Asda, the competition in retail industry has increased
and thus has made this rivalry much fierce and powerful. This makes this force high for
Sainsbury. Due to merger of these two companies, competitors like TESCO has drive down their
prices for attracting the customers. To tackle this force, Sainsbury can build the sustainable
differentiation as well as can collaborate with other competitors for increasing market capture
(Pyles, 2016).
Internal analysis of the organization
Strength
The major strength of Sainsbury is its increasing brand awareness. Due to high brand
recognition as well as awareness, Sainsbury has made a great position in market and in the hearts
of customers. This great brand image has helped the company to expand in wider geographies as
well as enlarge the customer base. Second strength of Sainsbury is its recent merger with Asda.
The merger of these two organizations have enabled Sainsbury to increase its profit margin as
well as enlarge the customer base. Besides this, this merger have helped Sainsbury to gain the
high scope over the suppliers and have helped to lower the prices. Third strength of Sainsbury is
its high expansion within wider geographies. Sainsbury after the merger with Asda have expanse
its operations in various countries as well as locations which has helped this organization to gain

the greater economies of scale. Sainsbury have its operations in more than 42 countries that has
helped the company to gain competitive advantage (Minár, 2016).
Fourth strength of Sainsbury which has helped this organization to establish a great
position in market and increase its profit margin its expansion into various product lines.
Sainsbury from simple grocery store have expanded its product line to wide range of the product
categories and it deals in more than 6 sectors. This expansion into the various product categories
has eventually helped the company to gain competitive advantage. Fifth strength of Sainsbury is
its high trained and skilled workforce. The number of employees in Sainsbury after merger with
Asda has increased to around 20% and this workforce is highly trained as well as skilled. This
trained skills provide a great quality services to the customers and forms the core strength if
Sainsbury. Sixth strength of Sainsbury is its innovative promotional strategies. Sainsbury have
adopted various innovative and creative promotional strategies for attracting the customers. One
of the well-known promotional strategy which has helped it to gain competitive advantage is
brand match advertising (Oyewunmi and et.al.,2017).
Weaknesses
The major weakness which has dominated Sainsbury and have somewhat affected its
overall operations is brand switching. Due to high brand switching, Sainsbury have faced a lot of
risks as well as difficulty which has somewhat affected its overall sales as well as profit margin.
This brand switching has been highly challenging for the organization and has posed a high
amount of risks. Second weakness of Sainsbury is its low margin. For attracting the customers, to
the outlet, company is continuously trying to drive down its cost and thus keeps the prices much
lower than competitors which have posed a great impact on its overall profit margin. Due to low
profit margin, Sainsbury is facing a high level of brunt in market. Third weakness which has
affected the operations as well as functioning of Sainsbury is the less choice among customers.
Due to the merger of Sainsbury and Asda, millions of customers are now facing the problems of
what to but and from where to buy. This merger has eventually resulted in the less choice among
customers and thus have affected sales of Sainsbury products to high extent (Srinivasan,
Thenmozhi and Vijayaraghavan, 2019).

Fourth weakness of Sainsbury is its less investment within research and development.
With the increasing technology as well as digitalization, the investment of Sainsbury in
innovation and research and development is somewhat low and below average due to which their
innovation intensity is low. This forms their major weakness. Due to this, it us not able to
compete within the market with leading players like TESCO. Fifth weakness of Sainsbury is
high rate of attrition. In comparison to its major competitors like TESCO, the attrition as well as
turnover rate of Sainsbury is much high, and they need to spend a great amount on providing the
effective training as swell as development to the employees. Sixth weakness of the company is
its limited ability to forecast the product demand. The management of Sainsbury is not much
competent in forecasting the product demands due to which company mainly misses various
opportunities. This becomes their major weakness which has affected its functioning and
operations to high extent (Winkler, Etter and Castelló, 2017).
Tows matrix
Opportunity Threat
Strength
Sainsbury is its recent merger
with Asda have come out with
increase its profit margin as
well as enlarge the customer
base.
This merger have helped
Sainsbury to gain the high
scope over the suppliers and
have helped to lower the
prices
opportunity for Sainsbury to
grow and develop its business
is the changing behaviour of
people towards their health.
As customers have now
become highly conscious as
well as concern toward their
health and wants healthy and
ready to eat food. In which the
company is continuously
trying to drive down its cost
and thus keeps the prices
much lower than competitors
which have posed a great
impact on its overall profit
margin

Weakness Sainsbury from simple
grocery store have expanded
its product line to wide range
of the product categories and
it deals in more than 6 sectors.
This is dealing to have the
perfection as Due to their high
brand image and recognition,
Sainsbury might face downfall
and will be a challenge for
company to sustain its
competitive advantage.
The growing need of
customers for innovation
might become a threat for
company as it would have to
increase its innovation and
automation level which can be
turning to be the weakness of
company as brand switching
has been highly challenging
for the organization and has
posed a high amount of risks.
VRIO framework
VRIO framework is basically the framework which helps the organizations to take
the effective decisions and uncovers the various resources which provide competitive
advantage.
Resources Valuable Rare Inimitable Organized
Local food
products
Yes
This makes the
perceived value
for these by
customers high.
These are also
valued more than
the competition
by customers due
to the
differentiation in
these products.
No Yes
The local food
products are not
that costly to
imitate as
identified by the
VRIO Analysis of
Sainsbury s.
These can be
acquired by
competitors as
well if they invest
No

a significant
amount in
research and
development.
Financial
resources
No Yes
This is because
competitors
would require a
lot of investment
and time to come
up with a better
distribution
network than that
of Sainsbury s.
These are also
possessed by very
few firms in the
industry.
No No
Patents Yes
These patents also
provide Sainsbury
s with licensing
revenue when it
licenses these
patents out to
other
manufacturers.
No Yes
This is because it
is not legally
allowed to imitate
a patented
product. Similar
resources to be
developed and
getting a patent
for them is also a
costly process.
No
Employees No No No Yes

Sainsbury s uses
this network to
reach out to its
customers by
ensuring that
products are
available on all of
its outlets.
Therefore, these
resources prove to
be a source of
sustained
competitive
advantage for
Sainsbury s.
 Local food products are strength of Sainsbury
 Its financial resources are strength of firm
 Patent is strength of firm and employees are also strength of business
Strategy evaluation
The recent strategy which Sainsbury took is the contribution towards environment. In
order to increase the customer base as well as gain competitive advantage, the main strategic aim
of Sainsbury is to reduce the emission of carbon and offer environmental friendly products and
thus gain a great market share there. This main strategic view of Sainsbury to inculcate
environmental safety in its core process and thus have made a fiver year plan for increasing the
contribution towards sustainability and environmental protection (Bhasin, 2017). Sainsbury have
increased its commitment towards protecting the environment by relying on the natural and safe
products and have made a sustainability plan which will mainly target on providing
environmental friendly products and sustainable manufacturing.