International Expansion Strategies for Sainsbury's: A Market Analysis

This report provides a comprehensive analysis of Sainsbury's international expansion strategies, focusing on identifying a suitable international market and the most appropriate mode of entry. The report begins with an introduction to international business and the need for strategic planning, follow...Read More

INTERNATIONAL
STRATEGIES

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1. Identification of suitable international market for Sainsbury's..........................................1
2. PESTLE analysis of the most appropriate international market for Sainsbury's...............1
3. (5- Forces analysis) of the chosen international market.....................................................3
4. Sainsbury's internal environment (VRIO analysis)............................................................6
5. Most suitable mode of entry for Sainsbury's......................................................................7
CONCLUSION...............................................................................................................................9
APPENDICES ..............................................................................................................................12
Appendix 1...........................................................................................................................12
.......................................................................................................................................................14

INTRODUCTION
As it can be clearly observed from the last decades that the structure of business is
changing rapidly. Earlier all the business strategies were meant to full fill limited objective of the
company but with the passage of time, new trends and growth have been seen in business sector.
This can be due to the introduction of fastest technologies that business operations now a days
have reaching to its wider range (Svejnar, 2013). This entire scenario has lead to introduce the
concept of International business. For this purpose, international strategies have came into
existence. Now most of the organisations are expanding their business in all over the world and
hence there is need of understanding major internal strategies. Within the help of these strategies,
company can expand its business throughout the world and attain tremendous level of growth in
terms of market shares and profit (Chytry, 2012). In context of this report, the concept of
international strategy will be evaluated with the help of Sainsbury's company.
TASK
1. Identification of suitable international market for Sainsbury's.
Sainsbury's is one the most popular brand in the world for their supermarkets. They have
successfully capture so many customers and now they are trying to move towards international
market. For this purpose, it is important for the company to be more specific about choosing the
right market. In context of this report, there are three major countries among which the best
suitable nation should be chosen in order to internationally expand the business of Sainsbury's.
PESTLE analysis of these countries have been covered in appendix 1.
2. PESTLE analysis of the most appropriate international market for Sainsbury's.
As per the above analysis of most suitable country for Sainsbury's in context of
international expansion, it has been noticed that there are several factors on the basis of which
expansion decision can be made (True, 2012). Among three given countries (Czech Republic,
Ireland and Lithuania), the most suitable country would be Czech Republic. There can be several
reason for this. As this nation is a developed and high income economy. That means there will be
maximum number of resources available in this country. Given below are the basic reason of
expanding business of Sainsbury's in this nation:
Growing economy- As this country comes under one of the most growing economy in
the world. It means there is a full chances of getting best output from any business in this
1

country. Growing economy can support business to operate in the most effective manner by
getting positive response from the market in form of high profit and market shares.
Stable condition- It is important to know the stability of any county in order to set up
any business. This is because high fluctuation rate in economic condition can disturb the entire
operation of a company (Kucera, Vana and Hradilek, 2012). As this country have a stable
condition which develops favourable platform to operate business.
Qualified workforce- In this country, there is a marvellous opportunity to have most potential
and qualified employees. As having skilled employees is one of the major factor which can
decides the success rate of any company. That is why, Sainsbury's can
Low cost of conducting business- This country do not have so many rules and
regulations in operating any business. The cost of commencing new venture is also very low.
This attract so many investor in order to come and operate their business in this country.
FDI- Foreign direct investment is one of the major factor which can directly help
different companies to expand their business and earn maximum number of market shares and
profit.
Excellent telecommunication and IT facilities- This is one of the major factor which
can foster the growth of any organisation (Danihelka, Chrtek Jr and Kaplan, 2012). Thus having
availability of best IT and telecommunication services can boost the growth of economy.
Unbeatable locations- It is a fact that commencing a business in mentioned county would
be beneficial for Sainsbury's as it offers tremendous location for opening new venture in centre
of EU.
Given below is the PESTLE analysis of Czech Republic.
Political- It has been noticed that from last decades, there were some major economic
reform took place in Czech Republic. It includes sectors like banking, IT and telecommunication.
It comes under stable economy hence most of the investor get attracted towards this country.
There is tremendous fiscal suitability by introducing pension and healthcare reforms (Czinkota
and Ronkainen, 2013). There were some political issues but with passage of time, different
political parties solved all tension and disputes among them hence, there is political
developments. As Sainsbury's is one of the leading brands in the name of supermarkets, thus
Czech republic will offer great platform in context of all favourable political conditions for the
2

company. In this way, mentioned company will get stable political conditions to implement their
business strategies. This will lead to their expansion.
Economic- GDP of Czech Republic will reach to 279.8 billion by the end of 2017. There
is a huge opportunity in sector of automotive, retail, energy and construction. According to the
past economic growth, it has been estimated that Czech Republic will surely achieve maximum
growth in economic condition in the coming year. They have a per capital income of 34,849
dollar and thus it become a most suitable country for Sainsbury's in order to expand their
business operations.
Social- As this country is very stable in nature. Its has sustainable political and economic
conditions. As far as its social factor is concern about, it has been noticed that this country have a
trendy approach in marketing. For example franchise like Pizza will be a great success in this
country. Similarly, Sainsbury's will also get good response from the customer of Czech Republic
in context of supermarkets. In this way it can be concluded that due to favourable social trends,
Sainsbury's can get tremendous opportunity to grow in international marketing by choosing
Czech republic as the most suitable market for their business.
Technological- It has been noticed that mentioned country is using all the latest
technologies which can help this country to make a tremendous market for investors.
Legal- As this country have liberal norms and particularly in context of opening any
business it has been found that, mentioned nation do not have strict policies and legislation in
respect of business operations (Vining, A.R., 2011). This makes Sainsbury's to freely expand its
business in this country.
Environmental- As this nation provide most suitable locations for opening of any
business in the middle of the EU. This country focused towards sustainable development with
Eco- friendly approach.
PESTLE of Ireland
Political – They have political stability which can help cited organisation in investing huge
amount because they are looking for nation where government do not changes in short interval of
time.
Economy – their economy is stable and they are going with a decent rate. Cited company will
will earn huge amount of revenue in upcoming time it they make smart move in current era.
3

Social – Before entering in Ireland. First cited company should understand some basic trend
relating to culture which is very simple. Most of the people in this country has same religion and
similar taste and preferences.
Technological – This country adopt technological changes in short period of time so cited
organisation must use latest technology in their business operations.
Legal – They legal structure is simple because they have fixed rate of tax. They do not provide
any extra benefits to the companies who are ready to invest huge amount.
Environment – In this country, people are very health conscious. They will never support an
organisation who will try to pollute their environment.
PESTLE of Lithuania
Political – Their political condition is stable and they do not fave any up and downs.
Economy – Their economy is small so it get severely impacted by small issues.
Social – Majority of population is of Lithuanian but Russians and poles are also present. They do
not have much diversity in their culture.
Technological – New changes that are happening in this sector enters after sometime.
Legal – their legal structure is simple and they solve various issues in short period of time.
Environmental – They are very serious about issues relating to pollution and omission of ozone
gas.
3. (5- Forces analysis) of the chosen international market.
It is very important for any company to be aware about its opportunities and threats in
any specific environment. For this context, there are several methods and techniques that are
used to evaluate all possible opportunities and threats that can arise in a particular region. In
context of international strategy, Sainsbury's have to consider all these factors in order to choose
best market for their business (Chytry, 2012). The most suitable market in international
expansion would be Czech Republic and thus it become necessary to be more aware about about
the opportunities and threats related to the market in which company wish to open its business as
an expansion.
In order to determine opportunities and threats, there are several models and methods that
can be adopted by the mentioned company. In this report, the chosen method is 5- force mode.
4

This model basically comprises with 5 factors namely competitive rivalry, buyers power, threat
of substitution, suppliers power and threat of new entry. Given below is the detained introduction
of these elements in context of 5 force model.
1. Threat of new entry- It is a known fact that the profitable market attract so many
investor. Due to this, the chances of new entry in the market also increases. Thus, a company
needs to make sure various factors that can affect the percentage of any new entry into the
market-
A) Liberal policies- If a country is having less number of barriers in the establishment of
any new venture, that means it will automatically allows a number of business to come and
operate in their country. In context of Czech Republic, it has been noticed that they do not have
any unnecessary hurdles and thus company can easily established their operations without any
restrictions.
B) Cost of production- It is one of the major factor that favours any business to expand
and exceed in the market (Yunna and Yisheng, 2014). Thus, Czech Republic have low cost of
product which attract so many investor. In this way, Sainsbury's can expand its business in the
mentioned country.
2. Threat of substitution- This can be understood as the way by which existing product
can be replaced by any other brand due to the same product category but different and unique
features. This is one of the critical factor which affects the success rate of any company. As it has
been evaluated in context of Czech Republic that this nation have some specific trends.
Customer are very specific towards their needs and wants. Thus, if a business get fully
recognised by the consumer of mentioned nation, this will surely reduce the threat of any new
substitution. Given below are factors that can affect the threat of substitution:
A) Ease of substation- If existing product is so popular in market and have tremendous
features then it become tough for the other company to replace that product (Yunna and Yisheng,
2014). Thus, there should not be any ease in substituting any product.
B) Relative price of substituted product- If price of substituted product is low as
compared to existing price of product, this will surely attract a number of customer and thus
prevailing product can be easily replaced.
3. Bargaining power of the customer- This can be defined as the way by which
customer can put so much of pressure on the company. In context of mentioned country, it has
5

been found that the customer have a set buying pattern and thus there will be no headache for the
company to get affected by this concept. Factors that can affect bargaining power of customer:
A) Awareness among customer- If consumer of a country or region are updated with
market research, that means they can very well choose the best and cost effective product.
Therefore, this can direct the way by which a customer does bargaining.
B) Availability of substitute products and services- If there are a number of alternates
of a product available in the market that means customer can easily switch to other product.
Thus, it is necessary for the company to evaluate parameters on the basis of which customer can
move to other product.
4. Bargaining power of suppliers- As it is very well estimated that suppliers are the
most crucial element in any organisation (Vining, A.R., 2011). They are responsible for meeting
up of several company's requirements. In this context, Sainsbury's have to evaluate those factors
with which the amount of bargaining power of suppliers can be determined.
5. Industry rivalry- It is one of the major factor that needs to be taken into consideration
by by the company in order to decide the success rate in the market. As this factor is directly
related with the competitor in the market.
5 forces model
6
Illustration 1: 5- Forces model

4. Sainsbury's internal environment (VRIO analysis).
In order to expand the business of Sainsbury's in the market, it is important for the
company to evaluate its internal environment (Su-ying, Min and Hong-feng, 2013). This is
because on the basis of internal analysis, company can determine those important element with
the help of which its expansion in the international market can be possible. Internal analysis can
be defined by evaluating strengths and weakness of the company. For this purpose, given below
is the VRIO analysis. This analysis basically deals with determining company's resources. With
the help of existing resources, company would be able to expand its business in the market.
1. Question of value- In this context, company can evaluate its present level of resources
and capability with which they can expand their business. As far as “value” is concern about, it is
understood as a question which states that if a company is able to exploit the opportunities and
face the threat in the market, then this will surely become strength of the company. On the other
side, if the company do not have command over these two mentioned factor, then this will be a
weakness for the company. There are basically some major opportunities that mentioned
company can adopt, these are given below:
Technological changes- This is so far the most important opportunity upon which
company can work. Technology is the so far the most important element which can foster the
suitability of any company in the market.
Economic climate- As stability of economy can become an opportunity for the company.
That is why, favourable economic condition can increase the chances of company to take
decision against expanding their business in any new market (Chapman, R.J., 2012). This also
include economies of scale. Stable economy increase the purchasing power of a customer.
In context of threats which can hamper the resource availability are threat of buyer, threat
of suppliers, threat of new entry, threat of substitution and threat of rivalry.
2. Question of rarity- This can be defined as the way by which company is having
totally unique features in their product. This rarity makes them so competitive in the market.
Thus, in context of mentioned company, it can be seen that Sainsbury's is one of the leading
brand in the market. They are famous for brining supermarket in the most effective manner. In
this context, company should try to introduce new product in the market with all new features.
This will attract a number of customer and thus
7

3. Question of imitability- As its name suggest that a company needs to produce unique
product. They try to work upon the fact that their product and services can not be copied and
made by any rivalry company in the market. Thus, there has to be product differentiation. As
Sainsbury's is the second largest supermarket company. That means company should try to use
such methods and techniques with the help of which they can producing best featured product
(Su-ying, Min and Hong-feng, 2013). This will lead to develop a situation where any other
competitor in the market would not be able to imitate their product.
4. Question of organisation- As according to the above factors that was value, rarity and
imitability. Company have already evaluated its capability of resources in context of value, rarity
and imitability. In this step, company try to make such affords on the basis of which they can
exploit these resources. If this entire process of VRIO has been successfully done, that means
company would be able to make a sustainable position in the market.
Given below is the diagram of VRIO which will make this concept more easy to understand.
5. Most suitable mode of entry for Sainsbury's.
From the above questions, it has been concluded that Sainsbury's can expand its business
in international level with help of proper market research. There were three countries namely
Czech Republic, Ireland and Lithuania (Fabling and Sanderson, 2013). Among all these
countries, the best country in which company can make its expansion would be Czech Republic.
8
Illustration 2: VRIO analysis

There are so many reasons for choosing this company. First can be the economic growth of this
nation (Morschett, Schramm-Klein, and Swoboda, 2010). Moreover, there are no strict rule and
regulations due to which it become easy for mentioned company to have international expansion
of their business in Czech Republic.
There can be several modes of entry that are presented in the market. Given below are the
details about all these entries:
Exporting- This is so far considered as the most common way of entering in any new
market. This concept holds the idea where certain business entity can simply export their product
in the targeted market. This method do not demand for so many complex strategies. Thus
company can adopt this strategy as a part of international strategy.
Franchising- This is again a very popular way of market entry. In this, company
basically offers tom use their name of its brand and work on their behalf. One of the best
example of this can be Domino's and McDonald (Laufs and Schwens, 2014). As mentioned
company done need franchise, they have their own set up of business and thus this would not be
a best market entry method.
Licensing- This can be defined as the way by which a company provide licence to other
company in order to make their product. This can include licensing patent, copyrights
trademarks, designs and various other intellectual properties. This is again would not be a
suitable market entry method for Sainsbury's.
Joint venture- In this type of market entry method, two company with their own
resources and combined ideas decided to work upon a single project or objective.
In context of given report it has been evaluated that Sainsbury's is trying to expand its
business in international market. For this purpose, they have already done market research.
Internal and external analysis are also done with the help of 5 forces model and VRIO analysis.
This makes them understand their strengths and weaknesses. They also determined their major
opportunities and threats in the market. When the company have defined all these parameters,
now they need to choose the best market entry method. For this purpose it has been evaluated
that export will be the most suitable market entry technique for the company in the chosen
country Czech Republic.
As mentioned country do not have so many restriction for those companies who wants to
expand their business internationally. Thus, Sainsbury's can easily export their product by
9

making a proper set up in Czech Republic (Holtbrügge and Baron, 2013). They will be able to
expand their business in this market as this nation offers so many favourable conditions. All their
international strategies can be successfully implemented and outcome will be positive. This
company will be able to achieve tremendous growth in the market and its market shares will also
increase.
CONCLUSION
On the basis of this report, it is possible to understand the border concept of international
strategy. As market is expanding day by day, hence it is necessary to be more aware about all the
tactics that would be applicable if in case a company decided to expand its business in
international market. Sainsbury's as given in this report, is worlds second largest supermarket
company. They have to expand their business in international market. For this purpose, they tried
to be more specific about choosing best medium of market entry method. They have done all
internal and external analysis including VRIO analysis and 5- forces model. Among three given
countries, the best nation in which they can move their business is Czech Republic. This is
because this county is having so many favourable condition due to which an investor can attract
towards this country in order to set up new business unit.
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REFERENCES
Books and Journals
Chapman, R.J., 2012. Appendix 9: VRIO Analysis. Simple Tools and Techniques for Enterprise
Risk Management, Second Edition. pp. 587-588.
Chytry, M., 2012. Vegetation of the Czech Republic: diversity, ecology, history and dynamics.
Preslia, 84(3), pp.427-504.
Danihelka, J., Chrtek Jr, J. and Kaplan, Z., 2012. Checklist of vascular plants of the Czech
Republic. Preslia, 84(3). pp. 647-811.
Fabling, R. and Sanderson, L., 2013. Exporting and firm performance: Market entry, investment
and expansion. Journal of International Economics, 89(2). pp.422-431.
Holtbrügge, D. and Baron, A., 2013. Market entry strategies in emerging markets: An
institutional study in the BRIC countries. Thunderbird International Business Review,
55(3). pp. 237-252.
Kucera, J., Vana, J. and Hradilek, Z., 2012. Bryophyte flora of the Czech Republic: updated
checklist and Red List and a brief analysis. Preslia, 84(3). pp. 813-850.
Laufs, K. and Schwens, C., 2014. Foreign market entry mode choice of small and medium-sized
enterprises: A systematic review and future research agenda. International Business
Review, 23(6). pp. 1109-1126.
Miles, D.A., 2011. Risk factors and business models: Understanding the five forces of
entrepreneurial risk and the causes of business failure. Universal-Publishers.
Morschett, D., Schramm-Klein, H. and Swoboda, B., 2010. Decades of research on market entry
modes: What do we really know about external antecedents of entry mode choice?.
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Schuster, T. and Holtbrügge, D., 2012. Market entry of multinational companies in markets at
the bottom of the pyramid: A learning perspective. International Business Review,
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Su-ying, G., Min, Z and Hong-feng, Z., 2013, July. The VRIO characteristics of corporate
strategic human capital at business level. In Management Science and Engineering
(ICMSE), 2013 International Conference on (pp. 827-832). IEEE.
Svejnar, J. ed., 2013. The Czech Republic and Economic Transition in Eastern Europe.
Academic Press.
True, J., 2012. Gender, globalization, and postsocialism: The Czech Republic after communism.
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Vining, A.R., 2011. Public agency external analysis using a modified “five forces” framework.
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1386.
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APPENDICES
Appendix 1
Czech Republic Ireland Lithuania
Political This country is having
no more political issue
from last decades. This
makes it more easy for
any new business to
set up their operations
in this country as a
part of international
expansion.
They have a political
system which is based
upon three major
division i.e., republic
of Ireland, northern
Ireland and an
independent state.
They have maintained
a very strong and
impactful democratic
traditions after
independence on 11th
march 1990.
Economic In terms of economic
condition, it have been
noticed from last
decades this nation is
getting more stability
in the economic
conditions. As it is a
developed country,
therefore the growth
rate of any company is
also increases.
They had struggle in
maintaining their
economic condition
but with the passage of
time they have
achieved a marginal
economic condition
but still there is a lot of
scope in its growth
area. GDP is 294.1
billion USD (2016)
In context of this
nation, it has been
evaluated that from
last years there is
tremendous growth in
GDP. They have flat
tax rate strategy. As
per 2016, 42.74
billion USD.
Social In terms of social
factor, it has been
found that the people
of this country are
very trendy and
choosy. They do not
They have a strong
religious beliefs and
thus their social
culture comprises with
this.
They have determined
all the social factors in
context of their
feeling, value and
belief. They are
socially rich.
13

like to switch into any
new product easily.
Technological They are using latest
technologies. This
helps them to attract so
many investor. Fastest
technologies must be
adopted in order to
generate global market
and this is what done
by this country.
They are trying to
adopt new
technologies and thus,
so develops so many
opportunities for the
investor.
They have already
been a great example
to adopt so many
technologies and thus
it increase their
stability in the market.
Legal They are not having
stringent legal system
and thus it helps other
company to
established their
business in this nation.
They have a set of
rules and regulations.
Their norms are made
against each and every
sector. Legal system
have made entire
country more stable.
Their legal system
helps the country to
revolves so many
issues and thus it also
helps the company to
established business on
the basis of set policies
against commencing
business operations.
Environmental They are specific
about environmental
laws and hence trying
their best to encourage
eco friendly products.
They have taken so
many measure in order
to protect environment
and thus there are
several policies that a
company need to
follow in order to
established business in
this country.
They have a set format
in which all
environmental policies
have been mentioned.
14